Correlation Between Magic Software and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Magic Software 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 Magic Software and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magic Software Enterprises and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Magic Software 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 Magic Software with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and PennyMac Mortgage.
Diversification Opportunities for Magic Software and PennyMac Mortgage
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magic and PennyMac is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Magic Software 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 Magic Software Enterprises 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 Magic Software i.e., Magic Software and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Magic Software and PennyMac Mortgage
Assuming the 90 days horizon Magic Software is expected to generate 4.76 times less return on investment than PennyMac Mortgage. In addition to that, Magic Software is 1.79 times more volatile than PennyMac Mortgage Investment. It trades about 0.01 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.05 per unit of volatility. If you would invest 919.00 in PennyMac Mortgage Investment on September 21, 2024 and sell it today you would earn a total of 351.00 from holding PennyMac Mortgage Investment or generate 38.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magic Software Enterprises vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Magic Software Enter |
| PennyMac Mortgage |
Magic Software and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and PennyMac Mortgage
The main advantage of trading using opposite Magic Software and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software 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.| Magic Software vs. Palo Alto Networks | Magic Software vs. Superior Plus Corp | Magic Software vs. SIVERS SEMICONDUCTORS AB | Magic Software vs. NorAm Drilling AS |
| PennyMac Mortgage vs. 24SEVENOFFICE GROUP AB | PennyMac Mortgage vs. KENEDIX OFFICE INV | PennyMac Mortgage vs. Iridium Communications | PennyMac Mortgage vs. Highlight Communications AG |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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