Correlation Between PennyMac Finl and Aldeyra

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

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

Diversification Opportunities for PennyMac Finl and Aldeyra

0.28

Correlation Coefficient

PennyMac Finl  Aldeyra

Modest diversification

The 3 months correlation between PennyMac and Aldeyra is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra and PennyMac Finl 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 PennyMac Finl Svcs are associated (or correlated) with Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Aldeyra go up and down completely randomly.

Pair Corralation between PennyMac Finl and Aldeyra

Given the investment horizon of 90 days PennyMac Finl is expected to generate 3.63 times less return on investment than Aldeyra. But when comparing it to its historical volatility, PennyMac Finl Svcs is 2.64 times less risky than Aldeyra. It trades about 0.05 of its potential returns per unit of risk. Aldeyra is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  285.00  in Aldeyra on October 5, 2024 and sell it today you would earn a total of  260.00  from holding Aldeyra or generate 91.23% return on investment over 90 days.

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

PennyMac Finl Svcs  vs.  Aldeyra

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.

Aldeyra

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aldeyra are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Aldeyra may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PennyMac Finl and Aldeyra

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

The idea behind PennyMac Finl Svcs and Aldeyra 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.