Correlation Between Timbercreek Financial and PennyMac Finl

Can any of the company-specific risk be diversified away by investing in both Timbercreek Financial and PennyMac Finl 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 Timbercreek Financial and PennyMac Finl into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timbercreek Financial Corp and PennyMac Finl Svcs, you can compare the effects of market volatilities on Timbercreek Financial and PennyMac Finl 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 Timbercreek Financial with a short position of PennyMac Finl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timbercreek Financial and PennyMac Finl.

Diversification Opportunities for Timbercreek Financial and PennyMac Finl

0.37

Correlation Coefficient

Timbercreek Financial  PennyMac Finl

Weak diversification

The 3 months correlation between Timbercreek and PennyMac is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial Corp and PennyMac Finl Svcs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Finl Svcs and Timbercreek Financial 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 Timbercreek Financial Corp are associated (or correlated) with PennyMac Finl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Finl Svcs has no effect on the direction of Timbercreek Financial i.e., Timbercreek Financial and PennyMac Finl go up and down completely randomly.

Pair Corralation between Timbercreek Financial and PennyMac Finl

Assuming the 90 days horizon Timbercreek Financial Corp is expected to under-perform the PennyMac Finl. In addition to that, Timbercreek Financial is 1.46 times more volatile than PennyMac Finl Svcs. It trades about -0.04 of its total potential returns per unit of risk. PennyMac Finl Svcs is currently generating about -0.02 per unit of volatility. If you would invest  10,206  in PennyMac Finl Svcs on October 6, 2024 and sell it today you would lose (131.00) from holding PennyMac Finl Svcs or give up 1.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.35%
Values	Daily Returns

Timbercreek Financial Corp  vs.  PennyMac Finl Svcs

Timbercreek Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timbercreek Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Timbercreek Financial and PennyMac Finl

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

The idea behind Timbercreek Financial Corp and PennyMac Finl Svcs 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.