Correlation Between First American and PennyMac Finl

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

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

Diversification Opportunities for First American and PennyMac Finl

0.52

Correlation Coefficient

First American  PennyMac Finl

Very weak diversification

The 3 months correlation between First and PennyMac is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding First American 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 First American 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 First American 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 First American i.e., First American and PennyMac Finl go up and down completely randomly.

Pair Corralation between First American and PennyMac Finl

Considering the 90-day investment horizon First American is expected to under-perform the PennyMac Finl. But the stock apears to be less risky and, when comparing its historical volatility, First American is 1.25 times less risky than PennyMac Finl. The stock trades about -0.01 of its potential returns per unit of risk. The PennyMac Finl Svcs is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12,405  in PennyMac Finl Svcs on September 13, 2025 and sell it today you would earn a total of  694.00  from holding PennyMac Finl Svcs or generate 5.59% return on investment over 90 days.

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

First American  vs.  PennyMac Finl Svcs

First American

Risk-Adjusted Performance

Weakest

Over the last 90 days First American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First American is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PennyMac Finl Svcs

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Finl Svcs are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, PennyMac Finl may actually be approaching a critical reversion point that can send shares even higher in January 2026.

Pair Trading with First American and PennyMac Finl

The main advantage of trading using opposite First American and PennyMac Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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 First American 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 Transaction History module to view history of all your transactions and understand their impact on performance.