Correlation Between PennyMac Finl and ECN Capital
Can any of the company-specific risk be diversified away by investing in both PennyMac Finl and ECN Capital 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 ECN Capital 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 ECN Capital Corp, you can compare the effects of market volatilities on PennyMac Finl and ECN Capital 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 ECN Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Finl and ECN Capital.
Diversification Opportunities for PennyMac Finl and ECN Capital
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PennyMac and ECN is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and ECN Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECN Capital 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 ECN Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECN Capital Corp has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and ECN Capital go up and down completely randomly.
Pair Corralation between PennyMac Finl and ECN Capital
Given the investment horizon of 90 days PennyMac Finl is expected to generate 1.5 times less return on investment than ECN Capital. But when comparing it to its historical volatility, PennyMac Finl Svcs is 2.19 times less risky than ECN Capital. It trades about 0.07 of its potential returns per unit of risk. ECN Capital Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 155.00 in ECN Capital Corp on September 14, 2024 and sell it today you would earn a total of 48.00 from holding ECN Capital Corp or generate 30.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.48% |
| Values | Daily Returns |
PennyMac Finl Svcs vs. ECN Capital Corp
Performance |
| Timeline |
| PennyMac Finl Svcs |
| ECN Capital Corp |
PennyMac Finl and ECN Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Finl and ECN Capital
The main advantage of trading using opposite PennyMac Finl and ECN Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Finl position performs unexpectedly, ECN Capital 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 ECN Capital will offset losses from the drop in ECN Capital's long position.| PennyMac Finl vs. Encore Capital Group | PennyMac Finl vs. Greystone Housing Impact | PennyMac Finl vs. Guild Holdings Co | PennyMac Finl vs. Security National Financial |
| ECN Capital vs. PennyMac Finl Svcs | ECN Capital vs. Velocity Financial Llc | ECN Capital vs. Encore Capital Group | ECN Capital vs. Greystone Housing Impact |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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