Correlation Between Wal-Mart and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Wal-Mart 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 Wal-Mart and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wal Mart de Mxico and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Wal-Mart 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 Wal-Mart with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal-Mart and PennyMac Mortgage.
Diversification Opportunities for Wal-Mart and PennyMac Mortgage
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Wal-Mart and PennyMac is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Wal-Mart 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 Wal Mart de Mxico 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 Wal-Mart i.e., Wal-Mart and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Wal-Mart and PennyMac Mortgage
Assuming the 90 days trading horizon Wal Mart de Mxico is expected to generate 2.11 times more return on investment than PennyMac Mortgage. However, Wal-Mart is 2.11 times more volatile than PennyMac Mortgage Investment. It trades about 0.19 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.04 per unit of risk. If you would invest 248.00 in Wal Mart de Mxico on September 13, 2024 and sell it today you would earn a total of 22.00 from holding Wal Mart de Mxico or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wal Mart de Mxico vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Wal Mart de |
| PennyMac Mortgage |
Wal-Mart and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wal-Mart and PennyMac Mortgage
The main advantage of trading using opposite Wal-Mart and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal-Mart 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.| Wal-Mart vs. COSMOSTEEL HLDGS | Wal-Mart vs. Tianjin Capital Environmental | Wal-Mart vs. Insteel Industries | Wal-Mart vs. BlueScope Steel Limited |
| PennyMac Mortgage vs. Selective Insurance Group | PennyMac Mortgage vs. Direct Line Insurance | PennyMac Mortgage vs. ZURICH INSURANCE GROUP | PennyMac Mortgage vs. Hyster Yale Materials Handling |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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