Correlation Between CEZ A and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both CEZ A 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 CEZ A and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEZ a s and PennyMac Mortgage Investment, you can compare the effects of market volatilities on CEZ A 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 CEZ A with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ A and PennyMac Mortgage.
Diversification Opportunities for CEZ A and PennyMac Mortgage
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CEZ and PennyMac is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CEZ a s and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and CEZ A 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 CEZ a s 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 CEZ A i.e., CEZ A and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between CEZ A and PennyMac Mortgage
Assuming the 90 days horizon CEZ A is expected to generate 2.25 times less return on investment than PennyMac Mortgage. But when comparing it to its historical volatility, CEZ a s is 1.15 times less risky than PennyMac Mortgage. It trades about 0.02 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,065 in PennyMac Mortgage Investment on September 12, 2024 and sell it today you would earn a total of 205.00 from holding PennyMac Mortgage Investment or generate 19.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
CEZ a s vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| CEZ a s |
| PennyMac Mortgage |
CEZ A and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEZ A and PennyMac Mortgage
The main advantage of trading using opposite CEZ A and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ A 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 CEZ a s 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. SIVERS SEMICONDUCTORS AB | PennyMac Mortgage vs. CHINA HUARONG ENERHD 50 | PennyMac Mortgage vs. NORDIC HALIBUT AS |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |