Correlation Between Goldman Sachs and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Goldman Sachs 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 Goldman Sachs and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goldman Sachs Group and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Goldman Sachs 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 Goldman Sachs with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and PennyMac Mortgage.
Diversification Opportunities for Goldman Sachs and PennyMac Mortgage
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Goldman and PennyMac is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs 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 Goldman Sachs 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 Goldman Sachs 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 Goldman Sachs i.e., Goldman Sachs and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Goldman Sachs and PennyMac Mortgage
Allowing for the 90-day total investment horizon Goldman Sachs is expected to generate 1.5 times less return on investment than PennyMac Mortgage. But when comparing it to its historical volatility, Goldman Sachs Group is 1.57 times less risky than PennyMac Mortgage. It trades about 0.27 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,271 in PennyMac Mortgage Investment on November 18, 2024 and sell it today you would earn a total of 106.00 from holding PennyMac Mortgage Investment or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goldman Sachs Group vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Goldman Sachs Group |
| PennyMac Mortgage |
Goldman Sachs and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goldman Sachs and PennyMac Mortgage
The main advantage of trading using opposite Goldman Sachs and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs 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.| Goldman Sachs vs. Glory Star New | Goldman Sachs vs. Lion Group Holding | Goldman Sachs vs. Hall of Fame | Goldman Sachs vs. Aquagold International |
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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.
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