Correlation Between PennyMac Finl and McDonalds
Can any of the company-specific risk be diversified away by investing in both PennyMac Finl and McDonalds 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 McDonalds 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 McDonalds, you can compare the effects of market volatilities on PennyMac Finl and McDonalds 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 McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Finl and McDonalds.
Diversification Opportunities for PennyMac Finl and McDonalds
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PennyMac and McDonalds is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds 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 McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and McDonalds go up and down completely randomly.
Pair Corralation between PennyMac Finl and McDonalds
Given the investment horizon of 90 days PennyMac Finl Svcs is expected to generate 2.2 times more return on investment than McDonalds. However, PennyMac Finl is 2.2 times more volatile than McDonalds. It trades about 0.23 of its potential returns per unit of risk. McDonalds is currently generating about -0.32 per unit of risk. If you would invest 10,218 in PennyMac Finl Svcs on October 25, 2024 and sell it today you would earn a total of 748.00 from holding PennyMac Finl Svcs or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
PennyMac Finl Svcs vs. McDonalds
Performance |
| Timeline |
| PennyMac Finl Svcs |
| McDonalds |
PennyMac Finl and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Finl and McDonalds
The main advantage of trading using opposite PennyMac Finl and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Finl position performs unexpectedly, McDonalds 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 McDonalds will offset losses from the drop in McDonalds' 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 |
| McDonalds vs. Bank of America | McDonalds vs. RLJ Lodging Trust | McDonalds vs. PennyMac Finl Svcs | McDonalds vs. Newhydrogen |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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