Correlation Between PennyMac Mortgage and Necessity Retail

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Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Necessity Retail 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 Necessity Retail 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 Necessity Retail REIT, you can compare the effects of market volatilities on PennyMac Mortgage and Necessity Retail 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 Necessity Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Necessity Retail.

Diversification Opportunities for PennyMac Mortgage and Necessity Retail

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between PennyMac and Necessity is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Necessity Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Necessity Retail REIT 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 Necessity Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Necessity Retail REIT has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Necessity Retail go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Necessity Retail

If you would invest  2,066  in PennyMac Mortgage Investment on August 28, 2024 and sell it today you would earn a total of  14.00  from holding PennyMac Mortgage Investment or generate 0.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

PennyMac Mortgage Investment  vs.  Necessity Retail REIT

 Performance 
       Timeline  
PennyMac Mortgage 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Necessity Retail REIT 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Necessity Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Necessity Retail is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PennyMac Mortgage and Necessity Retail Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PennyMac Mortgage and Necessity Retail

The main advantage of trading using opposite PennyMac Mortgage and Necessity Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Necessity Retail 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 Necessity Retail will offset losses from the drop in Necessity Retail's long position.
The idea behind PennyMac Mortgage Investment and Necessity Retail REIT pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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