Correlation Between Chimera Investment and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Chimera 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 Chimera 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 Chimera Investment and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Chimera 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 Chimera Investment with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chimera Investment and PennyMac Mortgage.
Diversification Opportunities for Chimera Investment and PennyMac Mortgage
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chimera and PennyMac is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Chimera Investment and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Chimera 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 Chimera Investment 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 Chimera Investment i.e., Chimera Investment and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Chimera Investment and PennyMac Mortgage
Assuming the 90 days trading horizon Chimera Investment is expected to generate 1.17 times more return on investment than PennyMac Mortgage. However, Chimera Investment is 1.17 times more volatile than PennyMac Mortgage Investment. It trades about 0.06 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.06 per unit of risk. If you would invest 1,656 in Chimera Investment on August 27, 2024 and sell it today you would earn a total of 704.00 from holding Chimera Investment or generate 42.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chimera Investment vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Chimera Investment |
| PennyMac Mortgage |
Chimera Investment and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chimera Investment and PennyMac Mortgage
The main advantage of trading using opposite Chimera Investment and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chimera 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.| Chimera Investment vs. Chimera Investment | Chimera Investment vs. PennyMac Mortgage Investment | Chimera Investment vs. Two Harbors Investment | Chimera Investment vs. Chimera Investment |
| PennyMac Mortgage vs. Annaly Capital Management | PennyMac Mortgage vs. AGNC Investment Corp | PennyMac Mortgage vs. Invesco Mortgage Capital | PennyMac Mortgage vs. Invesco Mortgage Capital |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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