Correlation Between PNC Financial and CHINA WATER

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

By analyzing existing cross correlation between The PNC Financial and CHINA WATER IGR, you can compare the effects of market volatilities on PNC Financial and CHINA WATER 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 CHINA WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Financial and CHINA WATER.

Diversification Opportunities for PNC Financial and CHINA WATER

-0.79

Correlation Coefficient

PNC Financial  CHINA WATER

Pay attention - limited upside

The 3 months correlation between PNC and CHINA is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding The PNC Financial and CHINA WATER IGR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA WATER IGR 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 The PNC Financial are associated (or correlated) with CHINA WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA WATER IGR has no effect on the direction of PNC Financial i.e., PNC Financial and CHINA WATER go up and down completely randomly.

Pair Corralation between PNC Financial and CHINA WATER

Assuming the 90 days horizon The PNC Financial is expected to generate 0.09 times more return on investment than CHINA WATER. However, The PNC Financial is 11.2 times less risky than CHINA WATER. It trades about -0.5 of its potential returns per unit of risk. CHINA WATER IGR is currently generating about -0.07 per unit of risk. If you would invest  20,200  in The PNC Financial on September 25, 2024 and sell it today you would lose (2,000) from holding The PNC Financial or give up 9.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

The PNC Financial  vs.  CHINA WATER IGR

PNC Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The PNC Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PNC Financial reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA WATER IGR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA WATER IGR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PNC Financial and CHINA WATER

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

The idea behind The PNC Financial and CHINA WATER IGR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.