Correlation Between PennyMac Mortgage and KKR Real
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and KKR Real 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 KKR Real 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 KKR Real Estate, you can compare the effects of market volatilities on PennyMac Mortgage and KKR Real 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 KKR Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and KKR Real.
Diversification Opportunities for PennyMac Mortgage and KKR Real
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and KKR is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and KKR Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Real Estate 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 KKR Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Real Estate has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and KKR Real go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and KKR Real
Assuming the 90 days trading horizon PennyMac Mortgage is expected to generate 1.61 times less return on investment than KKR Real. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 3.6 times less risky than KKR Real. It trades about 0.3 of its potential returns per unit of risk. KKR Real Estate is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,061 in KKR Real Estate on November 18, 2024 and sell it today you would earn a total of 71.00 from holding KKR Real Estate or generate 6.69% 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. KKR Real Estate
Performance |
| Timeline |
| PennyMac Mortgage |
| KKR Real Estate |
PennyMac Mortgage and KKR Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and KKR Real
The main advantage of trading using opposite PennyMac Mortgage and KKR Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, KKR Real 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 KKR Real will offset losses from the drop in KKR Real's long position.| PennyMac Mortgage vs. AG Mortgage Investment | PennyMac Mortgage vs. AG Mortgage Investment | PennyMac Mortgage vs. MFA Financial | PennyMac Mortgage vs. Invesco Mortgage Capital |
| KKR Real vs. Ellington Financial | KKR Real vs. Dynex Capital | KKR Real vs. Ares Commercial Real | KKR Real vs. Cherry Hill 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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