Correlation Between PennyMac Finl and Pasithea Therapeutics

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

Diversification Opportunities for PennyMac Finl and Pasithea Therapeutics

0.05

Correlation Coefficient

PennyMac Finl  Pasithea Therapeutics

Significant diversification

The 3 months correlation between PennyMac and Pasithea is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Pasithea Therapeutics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pasithea 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 Pasithea Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pasithea Therapeutics has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Pasithea Therapeutics go up and down completely randomly.

Pair Corralation between PennyMac Finl and Pasithea Therapeutics

Given the investment horizon of 90 days PennyMac Finl is expected to generate 213.17 times less return on investment than Pasithea Therapeutics. But when comparing it to its historical volatility, PennyMac Finl Svcs is 75.91 times less risky than Pasithea Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Pasithea Therapeutics Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4.59  in Pasithea Therapeutics Corp on October 5, 2024 and sell it today you would lose (1.13) from holding Pasithea Therapeutics Corp or give up 24.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.81%
Values	Daily Returns

PennyMac Finl Svcs  vs.  Pasithea Therapeutics Corp

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.

Pasithea Therapeutics

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pasithea Therapeutics Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pasithea Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennyMac Finl and Pasithea Therapeutics

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

The idea behind PennyMac Finl Svcs and Pasithea Therapeutics Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.