Correlation Between PNC Bank and Sigma Lithium

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

Diversification Opportunities for PNC Bank and Sigma Lithium

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between PNC Bank and Sigma is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PNC Bank and Sigma Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Corp 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 Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Corp has no effect on the direction of PNC Bank i.e., PNC Bank and Sigma Lithium go up and down completely randomly.

Pair Corralation between PNC Bank and Sigma Lithium

Considering the 90-day investment horizon PNC Bank is expected to under-perform the Sigma Lithium. But the stock apears to be less risky and, when comparing its historical volatility, PNC Bank is 2.31 times less risky than Sigma Lithium. The stock trades about -0.01 of its potential returns per unit of risk. The Sigma Lithium Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  510.00  in Sigma Lithium Corp on August 28, 2022 and sell it today you would earn a total of  2,537  from holding Sigma Lithium Corp or generate 497.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

PNC Bank  vs.  Sigma Lithium Corp

 Performance (%) 
       Timeline  
PNC Bank 
PNC Bank Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in PNC Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PNC Bank may actually be approaching a critical reversion point that can send shares even higher in December 2022.

PNC Bank Price Channel

Sigma Lithium Corp 
Sigma Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Sigma Lithium revealed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Price Channel

PNC Bank and Sigma Lithium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PNC Bank and Sigma Lithium

The main advantage of trading using opposite PNC Bank and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Bank position performs unexpectedly, Sigma Lithium 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 Sigma Lithium will offset losses from the drop in Sigma Lithium's long position.
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The idea behind PNC Bank and Sigma Lithium Corp 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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