Correlation Between T-MOBILE and PennyMac Financial

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

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

Diversification Opportunities for T-MOBILE and PennyMac Financial

-0.36

Correlation Coefficient

T-MOBILE  PennyMac Financial

Very good diversification

The 3 months correlation between T-MOBILE and PennyMac is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE US and PennyMac Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Financial and T-MOBILE 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 T MOBILE US are associated (or correlated) with PennyMac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Financial has no effect on the direction of T-MOBILE i.e., T-MOBILE and PennyMac Financial go up and down completely randomly.

Pair Corralation between T-MOBILE and PennyMac Financial

Assuming the 90 days trading horizon T MOBILE US is expected to generate 0.8 times more return on investment than PennyMac Financial. However, T MOBILE US is 1.24 times less risky than PennyMac Financial. It trades about 0.1 of its potential returns per unit of risk. PennyMac Financial Services is currently generating about -0.02 per unit of risk. If you would invest  21,246  in T MOBILE US on December 23, 2024 and sell it today you would earn a total of  2,389  from holding T MOBILE US or generate 11.24% return on investment over 90 days.

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

T MOBILE US  vs.  PennyMac Financial Services

T MOBILE US

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T-MOBILE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PennyMac Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days PennyMac Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PennyMac Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with T-MOBILE and PennyMac Financial

The main advantage of trading using opposite T-MOBILE and PennyMac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T-MOBILE position performs unexpectedly, PennyMac Financial 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 Financial will offset losses from the drop in PennyMac Financial's long position.

The idea behind T MOBILE US and PennyMac Financial Services 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.