Correlation Between Vaxcyte and PennyMac Finl

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

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

Diversification Opportunities for Vaxcyte and PennyMac Finl

0.4

Correlation Coefficient

Vaxcyte  PennyMac Finl

Very weak diversification

The 3 months correlation between Vaxcyte and PennyMac is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vaxcyte 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 Vaxcyte 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 Vaxcyte 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 Vaxcyte i.e., Vaxcyte and PennyMac Finl go up and down completely randomly.

Pair Corralation between Vaxcyte and PennyMac Finl

Given the investment horizon of 90 days Vaxcyte is expected to under-perform the PennyMac Finl. In addition to that, Vaxcyte is 1.77 times more volatile than PennyMac Finl Svcs. It trades about -0.15 of its total potential returns per unit of risk. PennyMac Finl Svcs is currently generating about -0.2 per unit of volatility. If you would invest  10,615  in PennyMac Finl Svcs on October 4, 2024 and sell it today you would lose (631.00) from holding PennyMac Finl Svcs or give up 5.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Vaxcyte  vs.  PennyMac Finl Svcs

Vaxcyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaxcyte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company 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 Vaxcyte and PennyMac Finl

The main advantage of trading using opposite Vaxcyte and PennyMac Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vaxcyte 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 Vaxcyte 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..