Correlation Between PennyMac Mortgage and Annaly Capital
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Annaly Capital 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 Annaly Capital 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 Annaly Capital Management, you can compare the effects of market volatilities on PennyMac Mortgage and Annaly Capital 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 Annaly Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Annaly Capital.
Diversification Opportunities for PennyMac Mortgage and Annaly Capital
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PennyMac and Annaly is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Annaly Capital go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Annaly Capital
Assuming the 90 days trading horizon PennyMac Mortgage Investment is expected to under-perform the Annaly Capital. In addition to that, PennyMac Mortgage is 2.06 times more volatile than Annaly Capital Management. It trades about -0.11 of its total potential returns per unit of risk. Annaly Capital Management is currently generating about 0.17 per unit of volatility. If you would invest 2,538 in Annaly Capital Management on August 29, 2024 and sell it today you would earn a total of 21.00 from holding Annaly Capital Management or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Mortgage Investment vs. Annaly Capital Management
Performance |
| Timeline |
| PennyMac Mortgage |
| Annaly Capital Management |
PennyMac Mortgage and Annaly Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Annaly Capital
The main advantage of trading using opposite PennyMac Mortgage and Annaly Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Annaly Capital 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 Annaly Capital will offset losses from the drop in Annaly Capital's long position.| PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. AG Mortgage Investment | PennyMac Mortgage vs. Chimera Investment |
| Annaly Capital vs. PennyMac Mortgage Investment | Annaly Capital vs. Two Harbors Investment | Annaly Capital vs. Chimera Investment | Annaly Capital vs. PennyMac 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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