Correlation Between PNC Bank and Principal Financial

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Can any of the company-specific risk be diversified away by investing in both PNC Bank and Principal 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 PNC Bank and Principal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PNC Bank and Principal Financial Group, you can compare the effects of market volatilities on PNC Bank and Principal 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 PNC Bank with a short position of Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Bank and Principal Financial.

Diversification Opportunities for PNC Bank and Principal Financial

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between PNC Bank and Principal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PNC Bank and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial and PNC Bank 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 Bank are associated (or correlated) with Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of PNC Bank i.e., PNC Bank and Principal Financial go up and down completely randomly.

Pair Corralation between PNC Bank and Principal Financial

Considering the 90-day investment horizon PNC Bank is expected to generate 1.81 times less return on investment than Principal Financial. But when comparing it to its historical volatility, PNC Bank is 1.51 times less risky than Principal Financial. It trades about 0.5 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.61 of returns per unit of risk over similar time horizon. If you would invest  6,113  in Principal Financial Group on May 15, 2022 and sell it today you would earn a total of  1,838  from holding Principal Financial Group or generate 30.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

PNC Bank  vs.  Principal Financial Group

 Performance (%) 
       Timeline  
PNC Bank 
PNC Bank Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in PNC Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, PNC Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

PNC Bank Price Channel

Principal Financial 
Principal Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Principal Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Principal Price Channel

PNC Bank and Principal Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PNC Bank and Principal Financial

The main advantage of trading using opposite PNC Bank and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Bank position performs unexpectedly, Principal 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 Principal Financial will offset losses from the drop in Principal Financial's long position.
The idea behind PNC Bank and Principal Financial Group 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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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