Correlation Between PennyMac Financial and MPH Health

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

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

Diversification Opportunities for PennyMac Financial and MPH Health

0.04

Correlation Coefficient

PennyMac Financial  MPH Health

Significant diversification

The 3 months correlation between PennyMac and MPH is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Financial Services and MPH Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPH Health Care and PennyMac 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 PennyMac Financial Services are associated (or correlated) with MPH Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPH Health Care has no effect on the direction of PennyMac Financial i.e., PennyMac Financial and MPH Health go up and down completely randomly.

Pair Corralation between PennyMac Financial and MPH Health

Assuming the 90 days horizon PennyMac Financial is expected to generate 1.22 times less return on investment than MPH Health. In addition to that, PennyMac Financial is 1.01 times more volatile than MPH Health Care. It trades about 0.01 of its total potential returns per unit of risk. MPH Health Care is currently generating about 0.01 per unit of volatility. If you would invest  2,420  in MPH Health Care on October 9, 2024 and sell it today you would earn a total of  0.00  from holding MPH Health Care or generate 0.0% return on investment over 90 days.

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

PennyMac Financial Services  vs.  MPH Health Care

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.

MPH Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MPH Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MPH Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PennyMac Financial and MPH Health

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

The idea behind PennyMac Financial Services and MPH Health Care 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.