Correlation Between Bank of America and PNC Financial
Can any of the company-specific risk be diversified away by investing in both Bank of America and PNC 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 Bank of America and PNC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and The PNC Financial, you can compare the effects of market volatilities on Bank of America and PNC 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 Bank of America with a short position of PNC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and PNC Financial.
Diversification Opportunities for Bank of America and PNC Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and PNC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and The PNC Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial and Bank of America 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 Bank of America are associated (or correlated) with PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial has no effect on the direction of Bank of America i.e., Bank of America and PNC Financial go up and down completely randomly.
Pair Corralation between Bank of America and PNC Financial
Considering the 90-day investment horizon Bank of America is expected to under-perform the PNC Financial. In addition to that, Bank of America is 2.23 times more volatile than The PNC Financial. It trades about -0.24 of its total potential returns per unit of risk. The PNC Financial is currently generating about -0.13 per unit of volatility. If you would invest 16,300 in The PNC Financial on January 5, 2025 and sell it today you would lose (700.00) from holding The PNC Financial or give up 4.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. The PNC Financial
Performance |
| Timeline |
| Bank of America |
| PNC Financial |
Bank of America and PNC Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and PNC Financial
The main advantage of trading using opposite Bank of America and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, PNC 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 PNC Financial will offset losses from the drop in PNC Financial's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| PNC Financial vs. US Bancorp | PNC Financial vs. Fifth Third Bancorp | PNC Financial vs. MT Bank Corp | PNC Financial vs. Huntington Bancshares Incorporated |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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