Correlation Between Universal Entertainment and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both Universal Entertainment and PennyMac 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 Universal Entertainment and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Entertainment and PennyMac Mortgage Investment, you can compare the effects of market volatilities on Universal Entertainment and PennyMac 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 Universal Entertainment with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and PennyMac Mortgage.
Diversification Opportunities for Universal Entertainment and PennyMac Mortgage
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and PennyMac is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Universal Entertainment 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 Universal Entertainment are associated (or correlated) with PennyMac Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Mortgage has no effect on the direction of Universal Entertainment i.e., Universal Entertainment and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between Universal Entertainment and PennyMac Mortgage
Assuming the 90 days trading horizon Universal Entertainment is expected to under-perform the PennyMac Mortgage. In addition to that, Universal Entertainment is 5.3 times more volatile than PennyMac Mortgage Investment. It trades about -0.12 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.04 per unit of volatility. If you would invest 1,260 in PennyMac Mortgage Investment on September 13, 2024 and sell it today you would earn a total of 10.00 from holding PennyMac Mortgage Investment or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Entertainment vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| Universal Entertainment |
| PennyMac Mortgage |
Universal Entertainment and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Entertainment and PennyMac Mortgage
The main advantage of trading using opposite Universal Entertainment and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment position performs unexpectedly, PennyMac 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 PennyMac Mortgage will offset losses from the drop in PennyMac Mortgage's long position.| Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc |
| PennyMac Mortgage vs. Selective Insurance Group | PennyMac Mortgage vs. Direct Line Insurance | PennyMac Mortgage vs. ZURICH INSURANCE GROUP | PennyMac Mortgage vs. Hyster Yale Materials Handling |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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