Correlation Between PennyMac Mortgage and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Selective Insurance 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 Selective Insurance 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 Selective Insurance Group, you can compare the effects of market volatilities on PennyMac Mortgage and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Selective Insurance.
Diversification Opportunities for PennyMac Mortgage and Selective Insurance
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Selective is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Selective Insurance go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Selective Insurance
Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.74 times more return on investment than Selective Insurance. However, PennyMac Mortgage Investment is 1.34 times less risky than Selective Insurance. It trades about 0.04 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.26 per unit of risk. If you would invest 1,260 in PennyMac Mortgage Investment on September 13, 2024 and sell it today you would earn a total of 10.00 from holding PennyMac Mortgage Investment or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. Selective Insurance Group
Performance |
| Timeline |
| PennyMac Mortgage |
| Selective Insurance |
PennyMac Mortgage and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Selective Insurance
The main advantage of trading using opposite PennyMac Mortgage and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance'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 |
| Selective Insurance vs. Insurance Australia Group | Selective Insurance vs. Superior Plus Corp | Selective Insurance vs. SIVERS SEMICONDUCTORS AB | Selective Insurance vs. CHINA HUARONG ENERHD 50 |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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