Correlation Between PennyMac Mortgage and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Norfolk Southern 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 Norfolk Southern 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 Norfolk Southern, you can compare the effects of market volatilities on PennyMac Mortgage and Norfolk Southern 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 Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Norfolk Southern.
Diversification Opportunities for PennyMac Mortgage and Norfolk Southern
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PennyMac and Norfolk is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern 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 Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Norfolk Southern go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Norfolk Southern
Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.17 times less return on investment than Norfolk Southern. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 2.98 times less risky than Norfolk Southern. It trades about 0.29 of its potential returns per unit of risk. Norfolk Southern is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 22,800 in Norfolk Southern on September 5, 2024 and sell it today you would earn a total of 3,200 from holding Norfolk Southern or generate 14.04% 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. Norfolk Southern
Performance |
| Timeline |
| PennyMac Mortgage |
| Norfolk Southern |
PennyMac Mortgage and Norfolk Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Norfolk Southern
The main advantage of trading using opposite PennyMac Mortgage and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Norfolk Southern 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 Norfolk Southern will offset losses from the drop in Norfolk Southern'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 |
| Norfolk Southern vs. MIRAMAR HOTEL INV | Norfolk Southern vs. Bumrungrad Hospital Public | Norfolk Southern vs. Natural Health Trends | Norfolk Southern vs. HYATT HOTELS A |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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