Correlation Between National Health and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both National Health 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 National Health and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Health Investors and PennyMac Mortgage Investment, you can compare the effects of market volatilities on National Health 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 National Health with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and PennyMac Mortgage.
Diversification Opportunities for National Health and PennyMac Mortgage
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and PennyMac is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and National Health 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 National Health Investors 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 National Health i.e., National Health and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between National Health and PennyMac Mortgage
Assuming the 90 days trading horizon National Health Investors is expected to generate 1.67 times more return on investment than PennyMac Mortgage. However, National Health is 1.67 times more volatile than PennyMac Mortgage Investment. It trades about 0.1 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.06 per unit of risk. If you would invest 5,939 in National Health Investors on September 3, 2024 and sell it today you would earn a total of 1,311 from holding National Health Investors or generate 22.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| National Health Investors |
| PennyMac Mortgage |
National Health and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and PennyMac Mortgage
The main advantage of trading using opposite National Health and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| PennyMac Mortgage vs. Superior Plus Corp | PennyMac Mortgage vs. NMI Holdings | PennyMac Mortgage vs. Origin Agritech | PennyMac Mortgage vs. SIVERS SEMICONDUCTORS AB |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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