Correlation Between PennyMac Mortgage and Invesco Mortgage
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Invesco 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 PennyMac Mortgage and Invesco Mortgage 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 Invesco Mortgage Capital, you can compare the effects of market volatilities on PennyMac Mortgage and Invesco 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 PennyMac Mortgage with a short position of Invesco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Invesco Mortgage.
Diversification Opportunities for PennyMac Mortgage and Invesco Mortgage
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PennyMac and Invesco is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital 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 Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Invesco Mortgage go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Invesco Mortgage
Assuming the 90 days trading horizon PennyMac Mortgage is expected to generate 1.31 times less return on investment than Invesco Mortgage. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.43 times less risky than Invesco Mortgage. It trades about 0.05 of its potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,734 in Invesco Mortgage Capital on August 23, 2024 and sell it today you would earn a total of 636.00 from holding Invesco Mortgage Capital or generate 36.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. Invesco Mortgage Capital
Performance |
| Timeline |
| PennyMac Mortgage |
| Invesco Mortgage Capital |
PennyMac Mortgage and Invesco Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Invesco Mortgage
The main advantage of trading using opposite PennyMac Mortgage and Invesco Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Invesco 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 Invesco Mortgage will offset losses from the drop in Invesco Mortgage's long position.| PennyMac Mortgage vs. ACRES Commercial Realty | PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. Cherry Hill Mortgage | PennyMac Mortgage vs. Cherry Hill Mortgage |
| Invesco Mortgage vs. AGNC Investment Corp | Invesco Mortgage vs. Annaly Capital Management | Invesco Mortgage vs. AGNC Investment Corp | Invesco Mortgage vs. New York Mortgage |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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