Correlation Between ALGOMA STEEL and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both ALGOMA STEEL and PennyMac Mortgage 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 ALGOMA STEEL and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALGOMA STEEL GROUP and PennyMac Mortgage Investment, you can compare the effects of market volatilities on ALGOMA STEEL and PennyMac Mortgage 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 ALGOMA STEEL with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALGOMA STEEL and PennyMac Mortgage.
Diversification Opportunities for ALGOMA STEEL and PennyMac Mortgage
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ALGOMA and PennyMac is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and ALGOMA STEEL 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 ALGOMA STEEL GROUP are associated (or correlated) with PennyMac Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Mortgage has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between ALGOMA STEEL and PennyMac Mortgage
Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to under-perform the PennyMac Mortgage. In addition to that, ALGOMA STEEL is 2.6 times more volatile than PennyMac Mortgage Investment. It trades about -0.23 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about -0.15 per unit of volatility. If you would invest 1,228 in PennyMac Mortgage Investment on October 12, 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 |
ALGOMA STEEL GROUP vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| ALGOMA STEEL GROUP |
| PennyMac Mortgage |
ALGOMA STEEL and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALGOMA STEEL and PennyMac Mortgage
The main advantage of trading using opposite ALGOMA STEEL and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALGOMA STEEL position performs unexpectedly, PennyMac Mortgage 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 PennyMac Mortgage will offset losses from the drop in PennyMac Mortgage's long position.| ALGOMA STEEL vs. BANK OF CHINA | ALGOMA STEEL vs. Dairy Farm International | ALGOMA STEEL vs. Hitachi Construction Machinery | ALGOMA STEEL vs. Synchrony Financial |
| PennyMac Mortgage vs. ALGOMA STEEL GROUP | PennyMac Mortgage vs. TOMBADOR IRON LTD | PennyMac Mortgage vs. STEEL DYNAMICS | PennyMac Mortgage vs. PLAYMATES TOYS |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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