Correlation Between PennyMac Mortgage and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Westinghouse Air 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 Westinghouse Air 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 Westinghouse Air Brake, you can compare the effects of market volatilities on PennyMac Mortgage and Westinghouse Air 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 Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Westinghouse Air.
Diversification Opportunities for PennyMac Mortgage and Westinghouse Air
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Westinghouse is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake 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 Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Westinghouse Air go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Westinghouse Air
Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.45 times less return on investment than Westinghouse Air. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.0 times less risky than Westinghouse Air. It trades about 0.07 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 18,645 in Westinghouse Air Brake on September 12, 2024 and sell it today you would earn a total of 770.00 from holding Westinghouse Air Brake or generate 4.13% 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. Westinghouse Air Brake
Performance |
| Timeline |
| PennyMac Mortgage |
| Westinghouse Air Brake |
PennyMac Mortgage and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Westinghouse Air
The main advantage of trading using opposite PennyMac Mortgage and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Westinghouse Air 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 Westinghouse Air will offset losses from the drop in Westinghouse Air'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 |
| Westinghouse Air vs. CSX Corporation | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. SIVERS SEMICONDUCTORS AB | Westinghouse Air vs. Norsk Hydro ASA |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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