Correlation Between PennyMac Financial and COVIVIO HOTELS

Can any of the company-specific risk be diversified away by investing in both PennyMac Financial and COVIVIO HOTELS 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 COVIVIO HOTELS 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 COVIVIO HOTELS INH, you can compare the effects of market volatilities on PennyMac Financial and COVIVIO HOTELS 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 COVIVIO HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Financial and COVIVIO HOTELS.

Diversification Opportunities for PennyMac Financial and COVIVIO HOTELS

-0.08

Correlation Coefficient

PennyMac Financial  COVIVIO HOTELS

Good diversification

The 3 months correlation between PennyMac and COVIVIO is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Financial Services and COVIVIO HOTELS INH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVIVIO HOTELS INH 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 COVIVIO HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVIVIO HOTELS INH has no effect on the direction of PennyMac Financial i.e., PennyMac Financial and COVIVIO HOTELS go up and down completely randomly.

Pair Corralation between PennyMac Financial and COVIVIO HOTELS

Assuming the 90 days horizon PennyMac Financial Services is expected to under-perform the COVIVIO HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, PennyMac Financial Services is 1.02 times less risky than COVIVIO HOTELS. The stock trades about -0.08 of its potential returns per unit of risk. The COVIVIO HOTELS INH is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,820  in COVIVIO HOTELS INH on October 5, 2024 and sell it today you would earn a total of  160.00  from holding COVIVIO HOTELS INH or generate 8.79% return on investment over 90 days.

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

PennyMac Financial Services  vs.  COVIVIO HOTELS INH

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.

COVIVIO HOTELS INH

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days COVIVIO HOTELS INH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, COVIVIO HOTELS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PennyMac Financial and COVIVIO HOTELS

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

The idea behind PennyMac Financial Services and COVIVIO HOTELS INH 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.