Correlation Between Ares Management and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Ares Management and PennyMac Mortgage 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 Ares Management and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management Corp and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Ares Management and PennyMac Mortgage 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 Ares Management with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and PennyMac Mortgage.
Diversification Opportunities for Ares Management and PennyMac Mortgage
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and PennyMac is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Ares Management 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 Ares Management Corp are associated (or correlated) with PennyMac Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Mortgage has no effect on the direction of Ares Management i.e., Ares Management and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Ares Management and PennyMac Mortgage
Assuming the 90 days horizon Ares Management Corp is expected to generate 3.05 times more return on investment than PennyMac Mortgage. However, Ares Management is 3.05 times more volatile than PennyMac Mortgage Investment. It trades about 0.12 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.19 per unit of risk. If you would invest 15,384 in Ares Management Corp on September 2, 2024 and sell it today you would earn a total of 1,068 from holding Ares Management Corp or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Ares Management Corp |
| PennyMac Mortgage |
Ares Management and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and PennyMac Mortgage
The main advantage of trading using opposite Ares Management and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, PennyMac Mortgage 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 Mortgage will offset losses from the drop in PennyMac Mortgage's long position.| Ares Management vs. Ameriprise Financial | Ares Management vs. Superior Plus Corp | Ares Management vs. NMI Holdings | Ares Management vs. Origin Agritech |
| PennyMac Mortgage vs. DXC Technology Co | PennyMac Mortgage vs. X FAB Silicon Foundries | PennyMac Mortgage vs. Hyrican Informationssysteme Aktiengesellschaft | PennyMac Mortgage vs. SCOTT TECHNOLOGY |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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