Correlation Between PennyMac Mortgage and China Resources
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and China Resources 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 China Resources 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 China Resources Beer, you can compare the effects of market volatilities on PennyMac Mortgage and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and China Resources.
Diversification Opportunities for PennyMac Mortgage and China Resources
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PennyMac and China is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and China Resources go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and China Resources
Assuming the 90 days horizon PennyMac Mortgage is expected to generate 4.66 times less return on investment than China Resources. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 4.76 times less risky than China Resources. It trades about 0.07 of its potential returns per unit of risk. China Resources Beer is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 272.00 in China Resources Beer on September 3, 2024 and sell it today you would earn a total of 40.00 from holding China Resources Beer or generate 14.71% 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. China Resources Beer
Performance |
| Timeline |
| PennyMac Mortgage |
| China Resources Beer |
PennyMac Mortgage and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and China Resources
The main advantage of trading using opposite PennyMac Mortgage and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| PennyMac Mortgage vs. Superior Plus Corp | PennyMac Mortgage vs. NMI Holdings | PennyMac Mortgage vs. Origin Agritech | PennyMac Mortgage vs. SIVERS SEMICONDUCTORS AB |
| China Resources vs. Chuangs China Investments | China Resources vs. PennyMac Mortgage Investment | China Resources vs. Wyndham Hotels Resorts | China Resources vs. MHP Hotel AG |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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