Correlation Between MGIC INVESTMENT and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both MGIC 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 MGIC 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 MGIC INVESTMENT and PennyMac Mortgage Investment, you can compare the effects of market volatilities on MGIC 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 MGIC INVESTMENT with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC INVESTMENT and PennyMac Mortgage.
Diversification Opportunities for MGIC INVESTMENT and PennyMac Mortgage
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MGIC and PennyMac is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MGIC 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 MGIC 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 MGIC 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 MGIC INVESTMENT i.e., MGIC INVESTMENT and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between MGIC INVESTMENT and PennyMac Mortgage
Assuming the 90 days trading horizon MGIC INVESTMENT is expected to generate 0.75 times more return on investment than PennyMac Mortgage. However, MGIC INVESTMENT is 1.33 times less risky than PennyMac Mortgage. It trades about 0.13 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 1,434 in MGIC INVESTMENT on August 31, 2024 and sell it today you would earn a total of 1,046 from holding MGIC INVESTMENT or generate 72.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
MGIC INVESTMENT vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| MGIC INVESTMENT |
| PennyMac Mortgage |
MGIC INVESTMENT and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGIC INVESTMENT and PennyMac Mortgage
The main advantage of trading using opposite MGIC INVESTMENT and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC 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.| MGIC INVESTMENT vs. SIVERS SEMICONDUCTORS AB | MGIC INVESTMENT vs. Darden Restaurants | MGIC INVESTMENT vs. Reliance Steel Aluminum | MGIC INVESTMENT vs. Q2M Managementberatung AG |
| PennyMac Mortgage vs. Superior Plus Corp | PennyMac Mortgage vs. NMI Holdings | PennyMac Mortgage vs. Origin Agritech | PennyMac Mortgage vs. SIVERS SEMICONDUCTORS AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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