Correlation Between COVIVIO HOTELS and PennyMac Financial

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

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

Diversification Opportunities for COVIVIO HOTELS and PennyMac Financial

-0.08

Correlation Coefficient

COVIVIO HOTELS  PennyMac Financial

Good diversification

The 3 months correlation between COVIVIO and PennyMac is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding COVIVIO HOTELS INH and PennyMac Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Financial and COVIVIO HOTELS 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 COVIVIO HOTELS INH 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 COVIVIO HOTELS i.e., COVIVIO HOTELS and PennyMac Financial go up and down completely randomly.

Pair Corralation between COVIVIO HOTELS and PennyMac Financial

Assuming the 90 days horizon COVIVIO HOTELS INH is expected to generate 0.85 times more return on investment than PennyMac Financial. However, COVIVIO HOTELS INH is 1.18 times less risky than PennyMac Financial. It trades about 0.08 of its potential returns per unit of risk. PennyMac Financial Services is currently generating about 0.06 per unit of risk. If you would invest  1,477  in COVIVIO HOTELS INH on October 5, 2024 and sell it today you would earn a total of  503.00  from holding COVIVIO HOTELS INH or generate 34.06% return on investment over 90 days.

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

COVIVIO HOTELS INH  vs.  PennyMac Financial Services

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.

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 COVIVIO HOTELS and PennyMac Financial

The main advantage of trading using opposite COVIVIO HOTELS and PennyMac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COVIVIO HOTELS 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 COVIVIO HOTELS INH 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.