Correlation Between Small Cap and Pnc International

Can any of the company-specific risk be diversified away by investing in both Small Cap and Pnc International 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 Small Cap and Pnc International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Stock and Pnc International Equity, you can compare the effects of market volatilities on Small Cap and Pnc International 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 Small Cap with a short position of Pnc International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Pnc International.

Diversification Opportunities for Small Cap and Pnc International

0.89

Correlation Coefficient

Small Cap  Pnc International

Very poor diversification

The 3 months correlation between Small and Pnc is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Pnc International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pnc International Equity and Small Cap 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 Small Cap Stock are associated (or correlated) with Pnc International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pnc International Equity has no effect on the direction of Small Cap i.e., Small Cap and Pnc International go up and down completely randomly.

Pair Corralation between Small Cap and Pnc International

Assuming the 90 days horizon Small Cap Stock is expected to generate 1.73 times more return on investment than Pnc International. However, Small Cap is 1.73 times more volatile than Pnc International Equity. It trades about 0.15 of its potential returns per unit of risk. Pnc International Equity is currently generating about 0.18 per unit of risk. If you would invest  1,218  in Small Cap Stock on May 3, 2025 and sell it today you would earn a total of  124.00  from holding Small Cap Stock or generate 10.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Small Cap Stock  vs.  Pnc International Equity

Small Cap Stock

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Stock are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pnc International Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pnc International Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pnc International may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Small Cap and Pnc International

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

The idea behind Small Cap Stock and Pnc International Equity 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.