Correlation Between AWILCO DRILLING and PennyMac Financial

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

By analyzing existing cross correlation between AWILCO DRILLING PLC and PennyMac Financial Services, you can compare the effects of market volatilities on AWILCO DRILLING and PennyMac 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 AWILCO DRILLING with a short position of PennyMac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AWILCO DRILLING and PennyMac Financial.

Diversification Opportunities for AWILCO DRILLING and PennyMac Financial

0.33

Correlation Coefficient

AWILCO DRILLING  PennyMac Financial

Weak diversification

The 3 months correlation between AWILCO and PennyMac is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AWILCO DRILLING PLC and PennyMac Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Financial and AWILCO DRILLING 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 AWILCO DRILLING PLC are associated (or correlated) with PennyMac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Financial has no effect on the direction of AWILCO DRILLING i.e., AWILCO DRILLING and PennyMac Financial go up and down completely randomly.

Pair Corralation between AWILCO DRILLING and PennyMac Financial

Assuming the 90 days trading horizon AWILCO DRILLING PLC is expected to generate 7.28 times more return on investment than PennyMac Financial. However, AWILCO DRILLING is 7.28 times more volatile than PennyMac Financial Services. It trades about 0.04 of its potential returns per unit of risk. PennyMac Financial Services is currently generating about 0.08 per unit of risk. If you would invest  232.00  in AWILCO DRILLING PLC on September 18, 2024 and sell it today you would lose (24.00) from holding AWILCO DRILLING PLC or give up 10.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

AWILCO DRILLING PLC  vs.  PennyMac Financial Services

AWILCO DRILLING PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AWILCO DRILLING PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, AWILCO DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

PennyMac Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennyMac Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PennyMac Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AWILCO DRILLING and PennyMac Financial

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

The idea behind AWILCO DRILLING PLC and PennyMac Financial Services 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.