Correlation Between PNC Financial and Gilead Sciences

Can any of the company-specific risk be diversified away by investing in both PNC Financial and Gilead Sciences at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PNC Financial and Gilead Sciences into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PNC Financial Services and Gilead Sciences, you can compare the effects of market volatilities on PNC Financial and Gilead Sciences and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PNC Financial with a short position of Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Financial and Gilead Sciences.

Diversification Opportunities for PNC Financial and Gilead Sciences

-0.47

Correlation Coefficient

PNC Financial  Gilead Sciences

Very good diversification

The 3 months correlation between PNC and Gilead is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and PNC Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PNC Financial Services are associated (or correlated) with Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of PNC Financial i.e., PNC Financial and Gilead Sciences go up and down completely randomly.

Pair Corralation between PNC Financial and Gilead Sciences

Considering the 90-day investment horizon PNC Financial Services is expected to generate 1.46 times more return on investment than Gilead Sciences. However, PNC Financial is 1.46 times more volatile than Gilead Sciences. It trades about 0.08 of its potential returns per unit of risk. Gilead Sciences is currently generating about -0.17 per unit of risk. If you would invest  14,764  in PNC Financial Services on February 12, 2024 and sell it today you would earn a total of  994.00  from holding PNC Financial Services or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PNC Financial Services  vs.  Gilead Sciences

PNC Financial Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PNC Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PNC Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Gilead Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gilead Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PNC Financial and Gilead Sciences

The main advantage of trading using opposite PNC Financial and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Financial position performs unexpectedly, Gilead Sciences can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Gilead Sciences will offset losses from the drop in Gilead Sciences' long position.

The idea behind PNC Financial Services and Gilead Sciences pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.