Correlation Between Guild Holdings and PennyMac Finl

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

By analyzing existing cross correlation between Guild Holdings Co and PennyMac Finl Svcs, you can compare the effects of market volatilities on Guild Holdings and PennyMac Finl 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 Guild Holdings with a short position of PennyMac Finl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guild Holdings and PennyMac Finl.

Diversification Opportunities for Guild Holdings and PennyMac Finl

0.73

Correlation Coefficient

Guild Holdings  PennyMac Finl

Poor diversification

The 3 months correlation between Guild and PennyMac is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Guild Holdings Co and PennyMac Finl Svcs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Finl Svcs and Guild Holdings 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 Guild Holdings Co are associated (or correlated) with PennyMac Finl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Finl Svcs has no effect on the direction of Guild Holdings i.e., Guild Holdings and PennyMac Finl go up and down completely randomly.

Pair Corralation between Guild Holdings and PennyMac Finl

Given the investment horizon of 90 days Guild Holdings Co is expected to under-perform the PennyMac Finl. In addition to that, Guild Holdings is 1.18 times more volatile than PennyMac Finl Svcs. It trades about -0.15 of its total potential returns per unit of risk. PennyMac Finl Svcs is currently generating about 0.02 per unit of volatility. If you would invest  10,566  in PennyMac Finl Svcs on August 31, 2024 and sell it today you would earn a total of  121.00  from holding PennyMac Finl Svcs or generate 1.15% return on investment over 90 days.

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

Guild Holdings Co  vs.  PennyMac Finl Svcs

Guild Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guild Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PennyMac Finl Svcs

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Finl Svcs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, PennyMac Finl is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Guild Holdings and PennyMac Finl

The main advantage of trading using opposite Guild Holdings and PennyMac Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guild Holdings position performs unexpectedly, PennyMac Finl 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 Finl will offset losses from the drop in PennyMac Finl's long position.

The idea behind Guild Holdings Co and PennyMac Finl Svcs 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.