Correlation Between PennyMac Mortgage and AG Mortgage
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and AG 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 AG 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 AG Mortgage Investment, you can compare the effects of market volatilities on PennyMac Mortgage and AG 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 AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and AG Mortgage.
Diversification Opportunities for PennyMac Mortgage and AG Mortgage
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PennyMac and MITT-PA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and AG Mortgage go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and AG Mortgage
Assuming the 90 days trading horizon PennyMac Mortgage is expected to generate 1.86 times less return on investment than AG Mortgage. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.22 times less risky than AG Mortgage. It trades about 0.05 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,380 in AG Mortgage Investment on August 23, 2024 and sell it today you would earn a total of 854.00 from holding AG Mortgage Investment or generate 61.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. AG Mortgage Investment
Performance |
| Timeline |
| PennyMac Mortgage |
| AG Mortgage Investment |
PennyMac Mortgage and AG Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and AG Mortgage
The main advantage of trading using opposite PennyMac Mortgage and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, AG 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 AG Mortgage will offset losses from the drop in AG 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 |
| AG Mortgage vs. Cherry Hill Mortgage | AG Mortgage vs. Chimera Investment | AG Mortgage vs. PennyMac Mortgage Investment | AG Mortgage vs. Lument Finance Trust |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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