Correlation Between AGNC Investment and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both AGNC Investment 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 AGNC Investment and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGNC Investment Corp and PennyMac Mortgage Investment, you can compare the effects of market volatilities on AGNC Investment 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 AGNC Investment with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and PennyMac Mortgage.
Diversification Opportunities for AGNC Investment and PennyMac Mortgage
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AGNC and PennyMac is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and AGNC Investment 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 AGNC Investment Corp 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 AGNC Investment i.e., AGNC Investment and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between AGNC Investment and PennyMac Mortgage
Assuming the 90 days horizon AGNC Investment is expected to generate 1.33 times less return on investment than PennyMac Mortgage. But when comparing it to its historical volatility, AGNC Investment Corp is 1.52 times less risky than PennyMac Mortgage. It trades about 0.09 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,637 in PennyMac Mortgage Investment on August 28, 2024 and sell it today you would earn a total of 443.00 from holding PennyMac Mortgage Investment or generate 27.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
AGNC Investment Corp vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| AGNC Investment Corp |
| PennyMac Mortgage |
AGNC Investment and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AGNC Investment and PennyMac Mortgage
The main advantage of trading using opposite AGNC Investment and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment 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.| AGNC Investment vs. AGNC Investment Corp | AGNC Investment vs. AGNC Investment Corp | AGNC Investment vs. AGNC Investment Corp | AGNC Investment vs. Annaly Capital Management |
| PennyMac Mortgage vs. Rithm Capital Corp | PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. Two Harbors Investment | PennyMac Mortgage vs. ARMOUR Residential REIT |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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