Correlation Between PRA and PennyMac Finl
Can any of the company-specific risk be diversified away by investing in both PRA 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 PRA and PennyMac Finl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRA Group and PennyMac Finl Svcs, you can compare the effects of market volatilities on PRA 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 PRA with a short position of PennyMac Finl. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRA and PennyMac Finl.
Diversification Opportunities for PRA and PennyMac Finl
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PRA and PennyMac is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding PRA Group 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 PRA 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 PRA Group 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 PRA i.e., PRA and PennyMac Finl go up and down completely randomly.
Pair Corralation between PRA and PennyMac Finl
Given the investment horizon of 90 days PRA is expected to generate 1.25 times less return on investment than PennyMac Finl. In addition to that, PRA is 1.03 times more volatile than PennyMac Finl Svcs. It trades about 0.12 of its total potential returns per unit of risk. PennyMac Finl Svcs is currently generating about 0.16 per unit of volatility. If you would invest 9,570 in PennyMac Finl Svcs on June 7, 2025 and sell it today you would earn a total of 1,958 from holding PennyMac Finl Svcs or generate 20.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRA Group vs. PennyMac Finl Svcs
Performance |
| Timeline |
| PRA Group |
| PennyMac Finl Svcs |
PRA and PennyMac Finl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRA and PennyMac Finl
The main advantage of trading using opposite PRA and PennyMac Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRA 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 PRA Group 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.| PennyMac Finl vs. Mr Cooper Group | PennyMac Finl vs. Onity Group | PennyMac Finl vs. Velocity Financial Llc | PennyMac Finl vs. Security National Financial |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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