Correlation Between PennyMac Finl and National Bank

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

Diversification Opportunities for PennyMac Finl and National Bank

0.33

Correlation Coefficient

PennyMac Finl  National Bank

Weak diversification

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

Pair Corralation between PennyMac Finl and National Bank

Given the investment horizon of 90 days PennyMac Finl Svcs is expected to generate 0.91 times more return on investment than National Bank. However, PennyMac Finl Svcs is 1.1 times less risky than National Bank. It trades about 0.08 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.02 per unit of risk. If you would invest  5,550  in PennyMac Finl Svcs on October 21, 2024 and sell it today you would earn a total of  5,212  from holding PennyMac Finl Svcs or generate 93.91% 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.  National Bank Holdings

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 newest stock price confusion, may contribute to short-horizon losses for the traders.

National Bank Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PennyMac Finl and National Bank

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

The idea behind PennyMac Finl Svcs and National Bank Holdings 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 Valuation module to check real value of public entities based on technical and fundamental data.