Correlation Between Cars and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Cars 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 Cars with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and PennyMac Mortgage.
Diversification Opportunities for Cars and PennyMac Mortgage
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cars and PennyMac is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Cars 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 Cars Inc 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 Cars i.e., Cars and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Cars and PennyMac Mortgage
Assuming the 90 days horizon Cars Inc is expected to generate 1.72 times more return on investment than PennyMac Mortgage. However, Cars is 1.72 times more volatile than PennyMac Mortgage Investment. It trades about 0.03 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 1,380 in Cars Inc on October 7, 2024 and sell it today you would earn a total of 250.00 from holding Cars Inc or generate 18.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Cars Inc |
| PennyMac Mortgage |
Cars and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and PennyMac Mortgage
The main advantage of trading using opposite Cars and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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.| Cars vs. Penske Automotive Group | Cars vs. Superior Plus Corp | Cars vs. NMI Holdings | Cars vs. SIVERS SEMICONDUCTORS AB |
| PennyMac Mortgage vs. W P Carey | PennyMac Mortgage vs. Gaming and Leisure | PennyMac Mortgage vs. Superior Plus Corp | PennyMac Mortgage vs. NMI Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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