Correlation Between First Ottawa and PNC Financial
Can any of the company-specific risk be diversified away by investing in both First Ottawa 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 First Ottawa and PNC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Ottawa Bancshares and PNC Financial Services, you can compare the effects of market volatilities on First Ottawa 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 First Ottawa with a short position of PNC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Ottawa and PNC Financial.
Diversification Opportunities for First Ottawa and PNC Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and PNC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Ottawa Bancshares and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services and First Ottawa 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 First Ottawa Bancshares 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 Services has no effect on the direction of First Ottawa i.e., First Ottawa and PNC Financial go up and down completely randomly.
Pair Corralation between First Ottawa and PNC Financial
Given the investment horizon of 90 days First Ottawa is expected to generate 2.6 times less return on investment than PNC Financial. But when comparing it to its historical volatility, First Ottawa Bancshares is 1.8 times less risky than PNC Financial. It trades about 0.13 of its potential returns per unit of risk. PNC Financial Services is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 15,226 in PNC Financial Services on September 1, 2024 and sell it today you would earn a total of 6,246 from holding PNC Financial Services or generate 41.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Ottawa Bancshares vs. PNC Financial Services
Performance |
| Timeline |
| First Ottawa Bancshares |
| PNC Financial Services |
First Ottawa and PNC Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Ottawa and PNC Financial
The main advantage of trading using opposite First Ottawa and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ottawa 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.| First Ottawa vs. Century Next Financial | First Ottawa vs. Citizens Financial Corp | First Ottawa vs. Triad Business Bank | First Ottawa vs. First Bankers Trustshares |
| PNC Financial vs. Truist Financial Corp | PNC Financial vs. KeyCorp | PNC Financial vs. Western Alliance Bancorporation | PNC Financial vs. Zions Bancorporation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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