Correlation Between PennyMac Mortgage and Cherry Hill
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Cherry Hill 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 PennyMac Mortgage and Cherry Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennyMac Mortgage Investment and Cherry Hill Mortgage, you can compare the effects of market volatilities on PennyMac Mortgage and Cherry Hill 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 PennyMac Mortgage with a short position of Cherry Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Cherry Hill.
Diversification Opportunities for PennyMac Mortgage and Cherry Hill
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Cherry is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage and PennyMac Mortgage 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 PennyMac Mortgage Investment are associated (or correlated) with Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Cherry Hill go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Cherry Hill
Assuming the 90 days trading horizon PennyMac Mortgage is expected to generate 1.16 times less return on investment than Cherry Hill. In addition to that, PennyMac Mortgage is 1.37 times more volatile than Cherry Hill Mortgage. It trades about 0.05 of its total potential returns per unit of risk. Cherry Hill Mortgage is currently generating about 0.08 per unit of volatility. If you would invest 1,728 in Cherry Hill Mortgage on August 27, 2024 and sell it today you would earn a total of 647.00 from holding Cherry Hill Mortgage or generate 37.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. Cherry Hill Mortgage
Performance |
| Timeline |
| PennyMac Mortgage |
| Cherry Hill Mortgage |
PennyMac Mortgage and Cherry Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Cherry Hill
The main advantage of trading using opposite PennyMac Mortgage and Cherry Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Cherry Hill 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 Cherry Hill will offset losses from the drop in Cherry Hill's long position.| PennyMac Mortgage vs. PennyMac Mortgage Investment | PennyMac Mortgage vs. Two Harbors Investment | PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. PennyMac Mortgage Investment |
| Cherry Hill vs. Annaly Capital Management | Cherry Hill vs. AGNC Investment Corp | Cherry Hill vs. Invesco Mortgage Capital | Cherry Hill 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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