Correlation Between PNC Financial and SIERRA METALS

Can any of the company-specific risk be diversified away by investing in both PNC Financial and SIERRA METALS 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 SIERRA METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The PNC Financial and SIERRA METALS, you can compare the effects of market volatilities on PNC Financial and SIERRA METALS 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 SIERRA METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Financial and SIERRA METALS.

Diversification Opportunities for PNC Financial and SIERRA METALS

-0.53

Correlation Coefficient

PNC Financial  SIERRA METALS

Excellent diversification

The 3 months correlation between PNC and SIERRA is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The PNC Financial and SIERRA METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA METALS 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 The PNC Financial are associated (or correlated) with SIERRA METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA METALS has no effect on the direction of PNC Financial i.e., PNC Financial and SIERRA METALS go up and down completely randomly.

Pair Corralation between PNC Financial and SIERRA METALS

Assuming the 90 days horizon The PNC Financial is expected to generate 0.59 times more return on investment than SIERRA METALS. However, The PNC Financial is 1.71 times less risky than SIERRA METALS. It trades about 0.1 of its potential returns per unit of risk. SIERRA METALS is currently generating about -0.06 per unit of risk. If you would invest  17,200  in The PNC Financial on September 27, 2024 and sell it today you would earn a total of  1,300  from holding The PNC Financial or generate 7.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The PNC Financial  vs.  SIERRA METALS

PNC Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The PNC Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PNC Financial reported solid returns over the last few months and may actually be approaching a breakup point.

SIERRA METALS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIERRA METALS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SIERRA METALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PNC Financial and SIERRA METALS

The main advantage of trading using opposite PNC Financial and SIERRA METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Financial position performs unexpectedly, SIERRA METALS 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 SIERRA METALS will offset losses from the drop in SIERRA METALS's long position.

The idea behind The PNC Financial and SIERRA METALS 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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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.