Correlation Between Pinnacle Financial and CNB Financial

Can any of the company-specific risk be diversified away by investing in both Pinnacle Financial and CNB Financial 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 Pinnacle Financial and CNB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pinnacle Financial Partners and CNB Financial, you can compare the effects of market volatilities on Pinnacle Financial and CNB Financial 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 Pinnacle Financial with a short position of CNB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Financial and CNB Financial.

Diversification Opportunities for Pinnacle Financial and CNB Financial

0.69

Correlation Coefficient

Pinnacle Financial  CNB Financial

Poor diversification

The 3 months correlation between Pinnacle and CNB is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Financial Partners and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial and Pinnacle 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 Pinnacle Financial Partners are associated (or correlated) with CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Pinnacle Financial i.e., Pinnacle Financial and CNB Financial go up and down completely randomly.

Pair Corralation between Pinnacle Financial and CNB Financial

Assuming the 90 days horizon Pinnacle Financial is expected to generate 1.33 times less return on investment than CNB Financial. But when comparing it to its historical volatility, Pinnacle Financial Partners is 2.81 times less risky than CNB Financial. It trades about 0.16 of its potential returns per unit of risk. CNB Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,358  in CNB Financial on September 3, 2024 and sell it today you would earn a total of  137.00  from holding CNB Financial or generate 5.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Pinnacle Financial Partners  vs.  CNB Financial

Pinnacle Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Financial Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pinnacle Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

CNB Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNB Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, CNB Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pinnacle Financial and CNB Financial

The main advantage of trading using opposite Pinnacle Financial and CNB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle Financial position performs unexpectedly, CNB Financial 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 CNB Financial will offset losses from the drop in CNB Financial's long position.

The idea behind Pinnacle Financial Partners and CNB Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.