Correlation Between PennyMac Finl and Biocardia

Can any of the company-specific risk be diversified away by investing in both PennyMac Finl and Biocardia 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 Biocardia 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 Biocardia, you can compare the effects of market volatilities on PennyMac Finl and Biocardia 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 Biocardia. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Finl and Biocardia.

Diversification Opportunities for PennyMac Finl and Biocardia

0.62

Correlation Coefficient

PennyMac Finl  Biocardia

Poor diversification

The 3 months correlation between PennyMac and Biocardia is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Biocardia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biocardia 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 Biocardia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biocardia has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Biocardia go up and down completely randomly.

Pair Corralation between PennyMac Finl and Biocardia

Given the investment horizon of 90 days PennyMac Finl Svcs is expected to generate 0.18 times more return on investment than Biocardia. However, PennyMac Finl Svcs is 5.59 times less risky than Biocardia. It trades about 0.06 of its potential returns per unit of risk. Biocardia is currently generating about -0.02 per unit of risk. If you would invest  6,481  in PennyMac Finl Svcs on October 5, 2024 and sell it today you would earn a total of  3,503  from holding PennyMac Finl Svcs or generate 54.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

PennyMac Finl Svcs  vs.  Biocardia

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.

Biocardia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biocardia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PennyMac Finl and Biocardia

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

The idea behind PennyMac Finl Svcs and Biocardia 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.