Correlation Between PNC Financial and Postal Savings

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Can any of the company-specific risk be diversified away by investing in both PNC Financial and Postal Savings 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 Postal Savings 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 Postal Savings Bank, you can compare the effects of market volatilities on PNC Financial and Postal Savings 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 Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Financial and Postal Savings.

Diversification Opportunities for PNC Financial and Postal Savings

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between PNC and Postal is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank 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 Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of PNC Financial i.e., PNC Financial and Postal Savings go up and down completely randomly.

Pair Corralation between PNC Financial and Postal Savings

Considering the 90-day investment horizon PNC Financial Services is expected to generate 0.89 times more return on investment than Postal Savings. However, PNC Financial Services is 1.12 times less risky than Postal Savings. It trades about 0.25 of its potential returns per unit of risk. Postal Savings Bank is currently generating about -0.02 per unit of risk. If you would invest  14,595  in PNC Financial Services on December 29, 2023 and sell it today you would earn a total of  1,402  from holding PNC Financial Services or generate 9.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

PNC Financial Services  vs.  Postal Savings Bank

 Performance 
       Timeline  
PNC Financial Services 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in PNC Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PNC Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Postal Savings Bank 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Postal Savings showed solid returns over the last few months and may actually be approaching a breakup point.

PNC Financial and Postal Savings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PNC Financial and Postal Savings

The main advantage of trading using opposite PNC Financial and Postal Savings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Financial position performs unexpectedly, Postal Savings 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 Postal Savings will offset losses from the drop in Postal Savings' long position.
The idea behind PNC Financial Services and Postal Savings Bank 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.
Check out your portfolio center.
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.

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