Correlation Between PennyMac Finl and Iteos Therapeutics

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

Diversification Opportunities for PennyMac Finl and Iteos Therapeutics

0.33

Correlation Coefficient

PennyMac Finl  Iteos Therapeutics

Weak diversification

The 3 months correlation between PennyMac and Iteos is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Iteos Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iteos Therapeutics 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 Iteos Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iteos Therapeutics has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Iteos Therapeutics go up and down completely randomly.

Pair Corralation between PennyMac Finl and Iteos Therapeutics

Given the investment horizon of 90 days PennyMac Finl Svcs is expected to generate 0.41 times more return on investment than Iteos Therapeutics. However, PennyMac Finl Svcs is 2.43 times less risky than Iteos Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Iteos Therapeutics is currently generating about -0.18 per unit of risk. If you would invest  9,917  in PennyMac Finl Svcs on October 20, 2024 and sell it today you would earn a total of  845.00  from holding PennyMac Finl Svcs or generate 8.52% 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.  Iteos Therapeutics

PennyMac Finl Svcs

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Finl Svcs are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, PennyMac Finl is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Iteos Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iteos Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PennyMac Finl and Iteos Therapeutics

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

The idea behind PennyMac Finl Svcs and Iteos Therapeutics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.