Correlation Between PennyMac Finl and UWM Holdings

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

Diversification Opportunities for PennyMac Finl and UWM Holdings

0.41

Correlation Coefficient

PennyMac Finl  UWM Holdings

Very weak diversification

The 3 months correlation between PennyMac and UWM is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and UWM Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UWM Holdings Corp 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 UWM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UWM Holdings Corp has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and UWM Holdings go up and down completely randomly.

Pair Corralation between PennyMac Finl and UWM Holdings

Given the investment horizon of 90 days PennyMac Finl is expected to generate 2.66 times less return on investment than UWM Holdings. But when comparing it to its historical volatility, PennyMac Finl Svcs is 1.24 times less risky than UWM Holdings. It trades about 0.01 of its potential returns per unit of risk. UWM Holdings Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  564.00  in UWM Holdings Corp on December 28, 2024 and sell it today you would lose (2.00) from holding UWM Holdings Corp or give up 0.35% of portfolio value over 90 days.

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

PennyMac Finl Svcs  vs.  UWM Holdings Corp

PennyMac Finl Svcs

Risk-Adjusted Performance

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

UWM Holdings Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PennyMac Finl and UWM Holdings

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

The idea behind PennyMac Finl Svcs and UWM Holdings 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.