Correlation Between PennyMac Finl and Third Harmonic

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

Diversification Opportunities for PennyMac Finl and Third Harmonic

0.09

Correlation Coefficient

PennyMac Finl  Third Harmonic

Significant diversification

The 3 months correlation between PennyMac and Third is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Third Harmonic Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Harmonic Bio 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 Third Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Harmonic Bio has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Third Harmonic go up and down completely randomly.

Pair Corralation between PennyMac Finl and Third Harmonic

Given the investment horizon of 90 days PennyMac Finl Svcs is expected to under-perform the Third Harmonic. But the stock apears to be less risky and, when comparing its historical volatility, PennyMac Finl Svcs is 2.99 times less risky than Third Harmonic. The stock trades about -0.12 of its potential returns per unit of risk. The Third Harmonic Bio is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,145  in Third Harmonic Bio on October 5, 2024 and sell it today you would lose (41.00) from holding Third Harmonic Bio or give up 3.58% of portfolio value over 90 days.

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

PennyMac Finl Svcs  vs.  Third Harmonic Bio

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.

Third Harmonic Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Third Harmonic Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Third Harmonic is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PennyMac Finl and Third Harmonic

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

The idea behind PennyMac Finl Svcs and Third Harmonic Bio 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.