Correlation Between US FOODS and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both US FOODS 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 US FOODS and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US FOODS HOLDING and PennyMac Mortgage Investment, you can compare the effects of market volatilities on US FOODS 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 US FOODS with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of US FOODS and PennyMac Mortgage.
Diversification Opportunities for US FOODS and PennyMac Mortgage
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between UFH and PennyMac is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and US FOODS 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 US FOODS HOLDING 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 US FOODS i.e., US FOODS and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between US FOODS and PennyMac Mortgage
Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 1.53 times more return on investment than PennyMac Mortgage. However, US FOODS is 1.53 times more volatile than PennyMac Mortgage Investment. It trades about 0.17 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.02 per unit of risk. If you would invest 4,900 in US FOODS HOLDING on October 26, 2024 and sell it today you would earn a total of 1,700 from holding US FOODS HOLDING or generate 34.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US FOODS HOLDING vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| US FOODS HOLDING |
| PennyMac Mortgage |
US FOODS and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US FOODS and PennyMac Mortgage
The main advantage of trading using opposite US FOODS and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US FOODS 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.| US FOODS vs. Mitsui Chemicals | US FOODS vs. Xinhua Winshare Publishing | US FOODS vs. Zijin Mining Group | US FOODS vs. EMBARK EDUCATION LTD |
| PennyMac Mortgage vs. US FOODS HOLDING | PennyMac Mortgage vs. MOLSON RS BEVERAGE | PennyMac Mortgage vs. NAGOYA RAILROAD | PennyMac Mortgage vs. TRAINLINE PLC LS |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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