Correlation Between PennyMac Finl and CNFinance Holdings
Can any of the company-specific risk be diversified away by investing in both PennyMac Finl and CNFinance 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 CNFinance 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 CNFinance Holdings, you can compare the effects of market volatilities on PennyMac Finl and CNFinance 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 CNFinance Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Finl and CNFinance Holdings.
Diversification Opportunities for PennyMac Finl and CNFinance Holdings
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between PennyMac and CNFinance is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance 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 CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and CNFinance Holdings go up and down completely randomly.
Pair Corralation between PennyMac Finl and CNFinance Holdings
Given the investment horizon of 90 days PennyMac Finl is expected to generate 6.99 times less return on investment than CNFinance Holdings. But when comparing it to its historical volatility, PennyMac Finl Svcs is 5.69 times less risky than CNFinance Holdings. It trades about 0.06 of its potential returns per unit of risk. CNFinance Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 100.00 in CNFinance Holdings on November 2, 2024 and sell it today you would earn a total of 35.00 from holding CNFinance Holdings or generate 35.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Finl Svcs vs. CNFinance Holdings
Performance |
| Timeline |
| PennyMac Finl Svcs |
| CNFinance Holdings |
PennyMac Finl and CNFinance Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Finl and CNFinance Holdings
The main advantage of trading using opposite PennyMac Finl and CNFinance Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Finl position performs unexpectedly, CNFinance 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 CNFinance Holdings will offset losses from the drop in CNFinance Holdings' long position.| PennyMac Finl vs. Guild Holdings Co | PennyMac Finl vs. Security National Financial | PennyMac Finl vs. Encore Capital Group |
| CNFinance Holdings vs. Guild Holdings Co | CNFinance Holdings vs. PennyMac Finl Svcs | CNFinance Holdings vs. Security National Financial | CNFinance Holdings vs. Encore Capital Group |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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