Correlation Between PennyMac Mortgage and NOW
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and NOW 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 PennyMac Mortgage and NOW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennyMac Mortgage Investment and NOW Inc, you can compare the effects of market volatilities on PennyMac Mortgage and NOW 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 PennyMac Mortgage with a short position of NOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and NOW.
Diversification Opportunities for PennyMac Mortgage and NOW
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PennyMac and NOW is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and NOW Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOW Inc and PennyMac Mortgage 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 PennyMac Mortgage Investment are associated (or correlated) with NOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOW Inc has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and NOW go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and NOW
Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.86 times less return on investment than NOW. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 2.29 times less risky than NOW. It trades about 0.05 of its potential returns per unit of risk. NOW Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,210 in NOW Inc on September 13, 2024 and sell it today you would earn a total of 210.00 from holding NOW Inc or generate 17.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. NOW Inc
Performance |
| Timeline |
| PennyMac Mortgage |
| NOW Inc |
PennyMac Mortgage and NOW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and NOW
The main advantage of trading using opposite PennyMac Mortgage and NOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, NOW 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 NOW will offset losses from the drop in NOW's long position.| 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 |
| NOW vs. Alfa Financial Software | NOW vs. Regions Financial | NOW vs. FORMPIPE SOFTWARE AB | NOW vs. Aozora Bank |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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