Correlation Between PennyMac Mortgage and Nucor
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Nucor 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 Nucor 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 Nucor, you can compare the effects of market volatilities on PennyMac Mortgage and Nucor 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 Nucor. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Nucor.
Diversification Opportunities for PennyMac Mortgage and Nucor
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Nucor is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor 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 Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Nucor go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Nucor
Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.41 times less return on investment than Nucor. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 3.56 times less risky than Nucor. It trades about 0.07 of its potential returns per unit of risk. Nucor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 13,516 in Nucor on September 3, 2024 and sell it today you would earn a total of 978.00 from holding Nucor or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. Nucor
Performance |
| Timeline |
| PennyMac Mortgage |
| Nucor |
PennyMac Mortgage and Nucor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Nucor
The main advantage of trading using opposite PennyMac Mortgage and Nucor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Nucor 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 Nucor will offset losses from the drop in Nucor'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 |
| Nucor vs. SCIENCE IN SPORT | Nucor vs. Sporttotal AG | Nucor vs. DICKS Sporting Goods | Nucor vs. MOVIE GAMES 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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