Correlation Between PennyMac Mortgage and Rithm Capital
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Rithm 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 Rithm 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 Rithm Capital Corp, you can compare the effects of market volatilities on PennyMac Mortgage and Rithm 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 Rithm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Rithm Capital.
Diversification Opportunities for PennyMac Mortgage and Rithm Capital
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PennyMac and Rithm is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Rithm Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm Capital Corp 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 Rithm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Capital Corp has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Rithm Capital go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Rithm Capital
Assuming the 90 days trading horizon PennyMac Mortgage Investment is expected to generate 1.81 times more return on investment than Rithm Capital. However, PennyMac Mortgage is 1.81 times more volatile than Rithm Capital Corp. It trades about 0.08 of its potential returns per unit of risk. Rithm Capital Corp is currently generating about 0.14 per unit of risk. If you would invest 1,637 in PennyMac Mortgage Investment on August 28, 2024 and sell it today you would earn a total of 443.00 from holding PennyMac Mortgage Investment or generate 27.06% 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. Rithm Capital Corp
Performance |
| Timeline |
| PennyMac Mortgage |
| Rithm Capital Corp |
PennyMac Mortgage and Rithm Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Mortgage and Rithm Capital
The main advantage of trading using opposite PennyMac Mortgage and Rithm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Rithm 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 Rithm Capital will offset losses from the drop in Rithm Capital's long position.| PennyMac Mortgage vs. Rithm Capital Corp | PennyMac Mortgage vs. Chimera Investment | PennyMac Mortgage vs. Two Harbors Investment | PennyMac Mortgage vs. ARMOUR Residential REIT |
| Rithm Capital vs. Rithm Capital Corp | Rithm Capital vs. Rithm Capital Corp | Rithm Capital vs. Rithm Capital Corp | Rithm 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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