Correlation Between PennyMac Financial and LOANDEPOT INC

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

Diversification Opportunities for PennyMac Financial and LOANDEPOT INC

0.3

Correlation Coefficient

PennyMac Financial  LOANDEPOT INC

Weak diversification

The 3 months correlation between PennyMac and LOANDEPOT is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Financial Services and LOANDEPOT INC A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOANDEPOT INC A 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 LOANDEPOT INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOANDEPOT INC A has no effect on the direction of PennyMac Financial i.e., PennyMac Financial and LOANDEPOT INC go up and down completely randomly.

Pair Corralation between PennyMac Financial and LOANDEPOT INC

Assuming the 90 days horizon PennyMac Financial Services is expected to generate 0.56 times more return on investment than LOANDEPOT INC. However, PennyMac Financial Services is 1.78 times less risky than LOANDEPOT INC. It trades about 0.17 of its potential returns per unit of risk. LOANDEPOT INC A is currently generating about 0.01 per unit of risk. If you would invest  9,500  in PennyMac Financial Services on October 20, 2024 and sell it today you would earn a total of  700.00  from holding PennyMac Financial Services or generate 7.37% return on investment over 90 days.

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

PennyMac Financial Services  vs.  LOANDEPOT INC A

PennyMac Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennyMac Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LOANDEPOT INC A

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PennyMac Financial and LOANDEPOT INC

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

The idea behind PennyMac Financial Services and LOANDEPOT INC A 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.