Correlation Between Guild Holdings and PennyMac Finl

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

By analyzing existing cross correlation between Guild Holdings Co and PennyMac Finl Svcs, you can compare the effects of market volatilities on Guild Holdings and PennyMac Finl 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 Guild Holdings with a short position of PennyMac Finl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guild Holdings and PennyMac Finl.

Diversification Opportunities for Guild Holdings and PennyMac Finl

-0.3

Correlation Coefficient

Guild Holdings  PennyMac Finl

Very good diversification

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

Pair Corralation between Guild Holdings and PennyMac Finl

Given the investment horizon of 90 days Guild Holdings Co is expected to generate 1.38 times more return on investment than PennyMac Finl. However, Guild Holdings is 1.38 times more volatile than PennyMac Finl Svcs. It trades about 0.01 of its potential returns per unit of risk. PennyMac Finl Svcs is currently generating about 0.01 per unit of risk. If you would invest  1,364  in Guild Holdings Co on December 29, 2024 and sell it today you would lose (2.00) from holding Guild Holdings Co or give up 0.15% of portfolio value over 90 days.

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

Guild Holdings Co  vs.  PennyMac Finl Svcs

Guild Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guild Holdings Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Guild Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

PennyMac Finl Svcs

Risk-Adjusted Performance

Very Weak

Over the last 90 days PennyMac Finl Svcs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, PennyMac Finl is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Guild Holdings and PennyMac Finl

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

The idea behind Guild Holdings Co and PennyMac Finl Svcs 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.