Correlation Between PennyMac Mortgage and North American
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and North American 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 North American 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 North American Construction, you can compare the effects of market volatilities on PennyMac Mortgage and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and North American.
Diversification Opportunities for PennyMac Mortgage and North American
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between PennyMac and North is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and North American go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and North American
Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.0 times less return on investment than North American. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 3.01 times less risky than North American. It trades about 0.2 of its potential returns per unit of risk. North American Construction is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,858 in North American Construction on September 20, 2024 and sell it today you would earn a total of 142.00 from holding North American Construction or generate 7.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. North American Construction
Performance |
| Timeline |
| PennyMac Mortgage |
| North American Const |
PennyMac Mortgage and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and North American
The main advantage of trading using opposite PennyMac Mortgage and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| PennyMac Mortgage vs. Superior Plus Corp | PennyMac Mortgage vs. SIVERS SEMICONDUCTORS AB | PennyMac Mortgage vs. CHINA HUARONG ENERHD 50 | PennyMac Mortgage vs. NORDIC HALIBUT AS |
| North American vs. SEI INVESTMENTS | North American vs. AOYAMA TRADING | North American vs. KIMBALL ELECTRONICS | North American vs. PennyMac Mortgage Investment |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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