Correlation Between Lexinfintech Holdings and PennyMac Finl

Can any of the company-specific risk be diversified away by investing in both Lexinfintech 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 Lexinfintech 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 Lexinfintech Holdings and PennyMac Finl Svcs, you can compare the effects of market volatilities on Lexinfintech 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 Lexinfintech Holdings with a short position of PennyMac Finl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lexinfintech Holdings and PennyMac Finl.

Diversification Opportunities for Lexinfintech Holdings and PennyMac Finl

-0.49

Correlation Coefficient

Lexinfintech Holdings  PennyMac Finl

Very good diversification

The 3 months correlation between Lexinfintech and PennyMac is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lexinfintech Holdings 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 Lexinfintech 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 Lexinfintech Holdings 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 Lexinfintech Holdings i.e., Lexinfintech Holdings and PennyMac Finl go up and down completely randomly.

Pair Corralation between Lexinfintech Holdings and PennyMac Finl

Allowing for the 90-day total investment horizon Lexinfintech Holdings is expected to generate 4.94 times more return on investment than PennyMac Finl. However, Lexinfintech Holdings is 4.94 times more volatile than PennyMac Finl Svcs. It trades about 0.26 of its potential returns per unit of risk. PennyMac Finl Svcs is currently generating about 0.02 per unit of risk. If you would invest  167.00  in Lexinfintech Holdings on August 31, 2024 and sell it today you would earn a total of  323.00  from holding Lexinfintech Holdings or generate 193.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lexinfintech Holdings  vs.  PennyMac Finl Svcs

Lexinfintech Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Lexinfintech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

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 Lexinfintech Holdings and PennyMac Finl

The main advantage of trading using opposite Lexinfintech Holdings and PennyMac Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lexinfintech 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 Lexinfintech Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.