Correlation Between Cherry Hill and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Cherry Hill 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 Cherry Hill and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cherry Hill Mortgage and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Cherry Hill 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 Cherry Hill with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cherry Hill and PennyMac Mortgage.
Diversification Opportunities for Cherry Hill and PennyMac Mortgage
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cherry and PennyMac is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Cherry Hill 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 Cherry Hill Mortgage 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 Cherry Hill i.e., Cherry Hill and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Cherry Hill and PennyMac Mortgage
Assuming the 90 days trading horizon Cherry Hill Mortgage is expected to generate 1.18 times more return on investment than PennyMac Mortgage. However, Cherry Hill is 1.18 times more volatile than PennyMac Mortgage Investment. It trades about 0.05 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.04 per unit of risk. If you would invest 2,213 in Cherry Hill Mortgage on October 24, 2024 and sell it today you would earn a total of 20.00 from holding Cherry Hill Mortgage or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cherry Hill Mortgage vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Cherry Hill Mortgage |
| PennyMac Mortgage |
Cherry Hill and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cherry Hill and PennyMac Mortgage
The main advantage of trading using opposite Cherry Hill and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill 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.| Cherry Hill vs. Lument Finance Trust | Cherry Hill vs. PennyMac Mortgage Investment | Cherry Hill vs. AG Mortgage Investment | Cherry Hill vs. Invesco Mortgage Capital |
| PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. AG Mortgage Investment | PennyMac Mortgage vs. Chimera Investment |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |