Correlation Between PNC Financial and Western Alliance
Can any of the company-specific risk be diversified away by investing in both PNC Financial and Western Alliance 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 Western Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PNC Financial Services and Western Alliance Bancorporation, you can compare the effects of market volatilities on PNC Financial and Western Alliance 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 Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Financial and Western Alliance.
Diversification Opportunities for PNC Financial and Western Alliance
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PNC and Western is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 PNC Financial Services are associated (or correlated) with Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of PNC Financial i.e., PNC Financial and Western Alliance go up and down completely randomly.
Pair Corralation between PNC Financial and Western Alliance
Considering the 90-day investment horizon PNC Financial is expected to generate 1.27 times less return on investment than Western Alliance. But when comparing it to its historical volatility, PNC Financial Services is 1.75 times less risky than Western Alliance. It trades about 0.17 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,251 in Western Alliance Bancorporation on August 24, 2024 and sell it today you would earn a total of 2,877 from holding Western Alliance Bancorporation or generate 46.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PNC Financial Services vs. Western Alliance Bancorp.
Performance |
| Timeline |
| PNC Financial Services |
| Western Alliance Ban |
PNC Financial and Western Alliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PNC Financial and Western Alliance
The main advantage of trading using opposite PNC Financial and Western Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Financial position performs unexpectedly, Western Alliance 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 Western Alliance will offset losses from the drop in Western Alliance's long position.| PNC Financial vs. Truist Financial Corp | PNC Financial vs. KeyCorp | PNC Financial vs. Western Alliance Bancorporation | PNC Financial vs. Zions Bancorporation |
| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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