Correlation Between Alaska Air and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Alaska Air 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 Alaska Air and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Alaska Air 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 Alaska Air with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and PennyMac Mortgage.
Diversification Opportunities for Alaska Air and PennyMac Mortgage
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alaska and PennyMac is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air 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 Alaska Air 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 Alaska Air 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 Alaska Air i.e., Alaska Air and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Alaska Air and PennyMac Mortgage
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.32 times more return on investment than PennyMac Mortgage. However, Alaska Air is 1.32 times more volatile than PennyMac Mortgage Investment. It trades about 0.02 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.03 per unit of risk. If you would invest 4,291 in Alaska Air Group on September 4, 2024 and sell it today you would earn a total of 686.00 from holding Alaska Air Group or generate 15.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Alaska Air Group |
| PennyMac Mortgage |
Alaska Air and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and PennyMac Mortgage
The main advantage of trading using opposite Alaska Air and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air 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.The idea behind Alaska Air Group and PennyMac Mortgage Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| PennyMac Mortgage vs. Superior Plus Corp | PennyMac Mortgage vs. NMI Holdings | PennyMac Mortgage vs. Origin Agritech | PennyMac Mortgage vs. SIVERS SEMICONDUCTORS AB |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |