Correlation Between PennyMac Mortgage and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Norsk Hydro 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 Norsk Hydro 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 Norsk Hydro ASA, you can compare the effects of market volatilities on PennyMac Mortgage and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Norsk Hydro.
Diversification Opportunities for PennyMac Mortgage and Norsk Hydro
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between PennyMac and Norsk is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Norsk Hydro go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Norsk Hydro
Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.77 times more return on investment than Norsk Hydro. However, PennyMac Mortgage Investment is 1.3 times less risky than Norsk Hydro. It trades about -0.15 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.23 per unit of risk. If you would invest 1,228 in PennyMac Mortgage Investment on October 11, 2024 and sell it today you would lose (38.00) from holding PennyMac Mortgage Investment or give up 3.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. Norsk Hydro ASA
Performance |
| Timeline |
| PennyMac Mortgage |
| Norsk Hydro ASA |
PennyMac Mortgage and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Norsk Hydro
The main advantage of trading using opposite PennyMac Mortgage and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| PennyMac Mortgage vs. ALGOMA STEEL GROUP | PennyMac Mortgage vs. TOMBADOR IRON LTD | PennyMac Mortgage vs. STEEL DYNAMICS | PennyMac Mortgage vs. PLAYMATES TOYS |
| Norsk Hydro vs. PennyMac Mortgage Investment | Norsk Hydro vs. Shenzhen Investment Limited | Norsk Hydro vs. Cal Maine Foods | Norsk Hydro vs. Japan Asia 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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