Correlation Between PennyMac Mortgage and Chimera Investment
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Chimera Investment 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 Chimera Investment 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 Chimera Investment, you can compare the effects of market volatilities on PennyMac Mortgage and Chimera Investment 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 Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Chimera Investment.
Diversification Opportunities for PennyMac Mortgage and Chimera Investment
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Chimera is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment 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 Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Chimera Investment go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Chimera Investment
Assuming the 90 days trading horizon PennyMac Mortgage is expected to generate 1.35 times less return on investment than Chimera Investment. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.04 times less risky than Chimera Investment. It trades about 0.05 of its potential returns per unit of risk. Chimera Investment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,656 in Chimera Investment on August 27, 2024 and sell it today you would earn a total of 704.00 from holding Chimera Investment or generate 42.51% 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. Chimera Investment
Performance |
| Timeline |
| PennyMac Mortgage |
| Chimera Investment |
PennyMac Mortgage and Chimera Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Chimera Investment
The main advantage of trading using opposite PennyMac Mortgage and Chimera Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Chimera Investment 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 Chimera Investment will offset losses from the drop in Chimera Investment'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 |
| Chimera Investment vs. Chimera Investment | Chimera Investment vs. PennyMac Mortgage Investment | Chimera Investment vs. Two Harbors Investment | Chimera Investment vs. Chimera Investment |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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