Correlation Between PennyMac Finl and Mr Cooper

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

Diversification Opportunities for PennyMac Finl and Mr Cooper

0.35

Correlation Coefficient

PennyMac Finl  Mr Cooper

Weak diversification

The 3 months correlation between PennyMac and COOP is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Mr Cooper Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Cooper Group 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 Mr Cooper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Cooper Group has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Mr Cooper go up and down completely randomly.

Pair Corralation between PennyMac Finl and Mr Cooper

Given the investment horizon of 90 days PennyMac Finl is expected to generate 8.61 times less return on investment than Mr Cooper. In addition to that, PennyMac Finl is 1.23 times more volatile than Mr Cooper Group. It trades about 0.01 of its total potential returns per unit of risk. Mr Cooper Group is currently generating about 0.13 per unit of volatility. If you would invest  9,477  in Mr Cooper Group on December 29, 2024 and sell it today you would earn a total of  1,228  from holding Mr Cooper Group or generate 12.96% 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.  Mr Cooper Group

PennyMac Finl Svcs

Risk-Adjusted Performance

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.

Mr Cooper Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Cooper Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Mr Cooper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennyMac Finl and Mr Cooper

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

The idea behind PennyMac Finl Svcs and Mr Cooper Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.