Correlation Between HCW Biologics and PennyMac Finl

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

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

Diversification Opportunities for HCW Biologics and PennyMac Finl

0.07

Correlation Coefficient

HCW Biologics  PennyMac Finl

Significant diversification

The 3 months correlation between HCW and PennyMac is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics 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 HCW Biologics 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 HCW Biologics 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 HCW Biologics i.e., HCW Biologics and PennyMac Finl go up and down completely randomly.

Pair Corralation between HCW Biologics and PennyMac Finl

Given the investment horizon of 90 days HCW Biologics is expected to generate 10.19 times more return on investment than PennyMac Finl. However, HCW Biologics is 10.19 times more volatile than PennyMac Finl Svcs. It trades about 0.02 of its potential returns per unit of risk. PennyMac Finl Svcs is currently generating about 0.07 per unit of risk. If you would invest  197.00  in HCW Biologics on October 4, 2024 and sell it today you would lose (152.00) from holding HCW Biologics or give up 77.16% of portfolio value over 90 days.

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

HCW Biologics  vs.  PennyMac Finl Svcs

HCW Biologics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

PennyMac Finl Svcs

Risk-Adjusted Performance

0 of 100

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 HCW Biologics and PennyMac Finl

The main advantage of trading using opposite HCW Biologics and PennyMac Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCW Biologics 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 HCW Biologics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.