Correlation Between New York and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both New York 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 New York and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New York Mortgage and PennyMac Mortgage Investment, you can compare the effects of market volatilities on New York 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 New York with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and PennyMac Mortgage.
Diversification Opportunities for New York and PennyMac Mortgage
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and PennyMac is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding New York Mortgage and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and New York 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 New York Mortgage 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 New York i.e., New York and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between New York and PennyMac Mortgage
Assuming the 90 days horizon New York Mortgage is expected to under-perform the PennyMac Mortgage. But the preferred stock apears to be less risky and, when comparing its historical volatility, New York Mortgage is 1.38 times less risky than PennyMac Mortgage. The preferred stock trades about -0.23 of its potential returns per unit of risk. The PennyMac Mortgage Investment is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,066 in PennyMac Mortgage Investment on August 27, 2024 and sell it today you would lose (4.00) from holding PennyMac Mortgage Investment or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New York Mortgage vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| New York Mortgage |
| PennyMac Mortgage |
New York and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New York and PennyMac Mortgage
The main advantage of trading using opposite New York and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York 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.| New York vs. Annaly Capital Management | New York vs. AGNC Investment Corp | New York vs. Invesco Mortgage Capital | New York vs. Invesco Mortgage Capital |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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