Correlation Between PennyMac Mortgage and GFL ENVIRONM
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and GFL ENVIRONM 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 GFL ENVIRONM 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 GFL ENVIRONM, you can compare the effects of market volatilities on PennyMac Mortgage and GFL ENVIRONM 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 GFL ENVIRONM. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and GFL ENVIRONM.
Diversification Opportunities for PennyMac Mortgage and GFL ENVIRONM
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PennyMac and GFL is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and GFL ENVIRONM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFL ENVIRONM 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 GFL ENVIRONM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFL ENVIRONM has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and GFL ENVIRONM go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and GFL ENVIRONM
Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.23 times less return on investment than GFL ENVIRONM. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.12 times less risky than GFL ENVIRONM. It trades about 0.03 of its potential returns per unit of risk. GFL ENVIRONM is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,711 in GFL ENVIRONM on September 4, 2024 and sell it today you would earn a total of 1,809 from holding GFL ENVIRONM or generate 66.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. GFL ENVIRONM
Performance |
| Timeline |
| PennyMac Mortgage |
| GFL ENVIRONM |
PennyMac Mortgage and GFL ENVIRONM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and GFL ENVIRONM
The main advantage of trading using opposite PennyMac Mortgage and GFL ENVIRONM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, GFL ENVIRONM 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 GFL ENVIRONM will offset losses from the drop in GFL ENVIRONM's long position.| PennyMac Mortgage vs. Superior Plus Corp | PennyMac Mortgage vs. NMI Holdings | PennyMac Mortgage vs. Origin Agritech | PennyMac Mortgage vs. SIVERS SEMICONDUCTORS AB |
| GFL ENVIRONM vs. Waste Management | GFL ENVIRONM vs. Republic Services | GFL ENVIRONM vs. Waste Connections | GFL ENVIRONM vs. Veolia Environnement SA |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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