Correlation Between Annaly Capital and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Annaly Capital 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 Annaly Capital and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Annaly Capital Management and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Annaly Capital 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 Annaly Capital with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and PennyMac Mortgage.
Diversification Opportunities for Annaly Capital and PennyMac Mortgage
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Annaly and PennyMac is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Annaly Capital 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 Annaly Capital Management 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 Annaly Capital i.e., Annaly Capital and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Annaly Capital and PennyMac Mortgage
Assuming the 90 days trading horizon Annaly Capital is expected to generate 1.11 times less return on investment than PennyMac Mortgage. But when comparing it to its historical volatility, Annaly Capital Management is 1.5 times less risky than PennyMac Mortgage. It trades about 0.09 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,784 in PennyMac Mortgage Investment on August 30, 2024 and sell it today you would earn a total of 679.00 from holding PennyMac Mortgage Investment or generate 38.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Annaly Capital Management vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Annaly Capital Management |
| PennyMac Mortgage |
Annaly Capital and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Annaly Capital and PennyMac Mortgage
The main advantage of trading using opposite Annaly Capital and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital 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.| Annaly Capital vs. Chimera Investment | Annaly Capital vs. PennyMac Mortgage Investment | Annaly Capital vs. Two Harbors Investment | Annaly Capital vs. Chimera Investment |
| PennyMac Mortgage vs. AG Mortgage Investment | PennyMac Mortgage vs. AG Mortgage Investment | 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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