Correlation Between PennyMac Mortgage and Two Harbors
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Two Harbors 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 Two Harbors 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 Two Harbors Investment, you can compare the effects of market volatilities on PennyMac Mortgage and Two Harbors 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 Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Two Harbors.
Diversification Opportunities for PennyMac Mortgage and Two Harbors
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Two is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Two Harbors Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors 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 Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investment has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Two Harbors go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Two Harbors
Assuming the 90 days trading horizon PennyMac Mortgage is expected to generate 1.92 times less return on investment than Two Harbors. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.02 times less risky than Two Harbors. It trades about 0.07 of its potential returns per unit of risk. Two Harbors Investment is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,765 in Two Harbors Investment on August 28, 2024 and sell it today you would earn a total of 714.00 from holding Two Harbors Investment or generate 40.45% 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. Two Harbors Investment
Performance |
| Timeline |
| PennyMac Mortgage |
| Two Harbors Investment |
PennyMac Mortgage and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Two Harbors
The main advantage of trading using opposite PennyMac Mortgage and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Two Harbors 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 Two Harbors will offset losses from the drop in Two Harbors' long position.| PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. AG Mortgage Investment | PennyMac Mortgage vs. Chimera Investment |
| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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