Correlation Between PennyMac Finl and Timbercreek Financial
Can any of the company-specific risk be diversified away by investing in both PennyMac Finl and Timbercreek 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 PennyMac Finl and Timbercreek Financial 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 Timbercreek Financial Corp, you can compare the effects of market volatilities on PennyMac Finl and Timbercreek 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 PennyMac Finl with a short position of Timbercreek Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Finl and Timbercreek Financial.
Diversification Opportunities for PennyMac Finl and Timbercreek Financial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PennyMac and Timbercreek is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Timbercreek Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timbercreek Financial 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 Timbercreek Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timbercreek Financial has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Timbercreek Financial go up and down completely randomly.
Pair Corralation between PennyMac Finl and Timbercreek Financial
Given the investment horizon of 90 days PennyMac Finl Svcs is expected to generate 0.78 times more return on investment than Timbercreek Financial. However, PennyMac Finl Svcs is 1.28 times less risky than Timbercreek Financial. It trades about 0.18 of its potential returns per unit of risk. Timbercreek Financial Corp is currently generating about 0.12 per unit of risk. If you would invest 10,027 in PennyMac Finl Svcs on September 5, 2024 and sell it today you would earn a total of 537.00 from holding PennyMac Finl Svcs or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Finl Svcs vs. Timbercreek Financial Corp
Performance |
| Timeline |
| PennyMac Finl Svcs |
| Timbercreek Financial |
PennyMac Finl and Timbercreek Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Finl and Timbercreek Financial
The main advantage of trading using opposite PennyMac Finl and Timbercreek Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Finl position performs unexpectedly, Timbercreek 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 Timbercreek Financial will offset losses from the drop in Timbercreek Financial'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 |
| Timbercreek Financial vs. PennyMac Finl Svcs | Timbercreek Financial vs. Encore Capital Group | Timbercreek Financial vs. Rocket Companies | Timbercreek Financial vs. Loandepot |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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