Correlation Between TRAINLINE PLC and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both TRAINLINE PLC 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 TRAINLINE PLC and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRAINLINE PLC LS and PennyMac Mortgage Investment, you can compare the effects of market volatilities on TRAINLINE PLC 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 TRAINLINE PLC with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAINLINE PLC and PennyMac Mortgage.
Diversification Opportunities for TRAINLINE PLC and PennyMac Mortgage
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between TRAINLINE and PennyMac is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and TRAINLINE PLC 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 TRAINLINE PLC LS 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 TRAINLINE PLC i.e., TRAINLINE PLC and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between TRAINLINE PLC and PennyMac Mortgage
Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to under-perform the PennyMac Mortgage. In addition to that, TRAINLINE PLC is 1.81 times more volatile than PennyMac Mortgage Investment. It trades about -0.18 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about -0.01 per unit of volatility. If you would invest 1,220 in PennyMac Mortgage Investment on November 5, 2024 and sell it today you would lose (10.00) from holding PennyMac Mortgage Investment or give up 0.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRAINLINE PLC LS vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| TRAINLINE PLC LS |
| PennyMac Mortgage |
TRAINLINE PLC and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRAINLINE PLC and PennyMac Mortgage
The main advantage of trading using opposite TRAINLINE PLC and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAINLINE PLC 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.| TRAINLINE PLC vs. Motorcar Parts of | TRAINLINE PLC vs. GRIFFIN MINING LTD | TRAINLINE PLC vs. SERI INDUSTRIAL EO | TRAINLINE PLC vs. GALENA MINING LTD |
| PennyMac Mortgage vs. COSTCO WHOLESALE CDR | PennyMac Mortgage vs. Brockhaus Capital Management | PennyMac Mortgage vs. Universal Health Realty | PennyMac Mortgage vs. Cardinal Health |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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