Correlation Between Kezar Life and PennyMac Finl

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

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

Diversification Opportunities for Kezar Life and PennyMac Finl

0.28

Correlation Coefficient

Kezar Life  PennyMac Finl

Modest diversification

The 3 months correlation between Kezar and PennyMac is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kezar Life Sciences 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 Kezar Life 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 Kezar Life Sciences 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 Kezar Life i.e., Kezar Life and PennyMac Finl go up and down completely randomly.

Pair Corralation between Kezar Life and PennyMac Finl

Considering the 90-day investment horizon Kezar Life Sciences is expected to under-perform the PennyMac Finl. In addition to that, Kezar Life is 2.45 times more volatile than PennyMac Finl Svcs. It trades about -0.07 of its total potential returns per unit of risk. PennyMac Finl Svcs is currently generating about 0.08 per unit of volatility. If you would invest  5,532  in PennyMac Finl Svcs on October 5, 2024 and sell it today you would earn a total of  4,452  from holding PennyMac Finl Svcs or generate 80.48% return on investment over 90 days.

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

Kezar Life Sciences  vs.  PennyMac Finl Svcs

Kezar Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kezar Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 Kezar Life and PennyMac Finl

The main advantage of trading using opposite Kezar Life and PennyMac Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kezar Life 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 Kezar Life Sciences 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.