Correlation Between PennyMac Finl and Guild Holdings

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

Diversification Opportunities for PennyMac Finl and Guild Holdings

0.73

Correlation Coefficient

PennyMac Finl  Guild Holdings

Poor diversification

The 3 months correlation between PennyMac and Guild is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Guild Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guild Holdings 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 Guild Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guild Holdings has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Guild Holdings go up and down completely randomly.

Pair Corralation between PennyMac Finl and Guild Holdings

Given the investment horizon of 90 days PennyMac Finl Svcs is not expected to generate positive returns. However, PennyMac Finl Svcs is 1.33 times less risky than Guild Holdings. It waists most of its returns potential to compensate for thr risk taken. Guild Holdings is generating about -0.07 per unit of risk. If you would invest  10,768  in PennyMac Finl Svcs on August 30, 2024 and sell it today you would lose (81.00) from holding PennyMac Finl Svcs or give up 0.75% of portfolio value over 90 days.

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

PennyMac Finl Svcs  vs.  Guild Holdings Co

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.

Guild Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guild Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PennyMac Finl and Guild Holdings

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

The idea behind PennyMac Finl Svcs and Guild Holdings Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.