Correlation Between PennyMac Mortgage and Franklin BSP
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Franklin BSP 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 Franklin BSP 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 Franklin BSP Realty, you can compare the effects of market volatilities on PennyMac Mortgage and Franklin BSP 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 Franklin BSP. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Franklin BSP.
Diversification Opportunities for PennyMac Mortgage and Franklin BSP
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Franklin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Franklin BSP Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin BSP Realty 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 Franklin BSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin BSP Realty has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Franklin BSP go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Franklin BSP
Assuming the 90 days trading horizon PennyMac Mortgage Investment is expected to generate 0.83 times more return on investment than Franklin BSP. However, PennyMac Mortgage Investment is 1.21 times less risky than Franklin BSP. It trades about 0.09 of its potential returns per unit of risk. Franklin BSP Realty is currently generating about 0.06 per unit of risk. If you would invest 2,282 in PennyMac Mortgage Investment on August 30, 2024 and sell it today you would earn a total of 180.00 from holding PennyMac Mortgage Investment or generate 7.89% 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. Franklin BSP Realty
Performance |
| Timeline |
| PennyMac Mortgage |
| Franklin BSP Realty |
PennyMac Mortgage and Franklin BSP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Franklin BSP
The main advantage of trading using opposite PennyMac Mortgage and Franklin BSP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Franklin BSP 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 Franklin BSP will offset losses from the drop in Franklin BSP's long position.| PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. PennyMac Mortgage Investment | PennyMac Mortgage vs. Two Harbors Investment | PennyMac Mortgage vs. Chimera Investment |
| Franklin BSP vs. ACRES Commercial Realty | Franklin BSP vs. Dynex Capital | Franklin BSP vs. PennyMac Mortgage Investment | Franklin BSP vs. AG Mortgage 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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