Correlation Between CHINA HUARONG and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG 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 CHINA HUARONG and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and PennyMac Mortgage Investment, you can compare the effects of market volatilities on CHINA HUARONG 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 CHINA HUARONG with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and PennyMac Mortgage.
Diversification Opportunities for CHINA HUARONG and PennyMac Mortgage
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHINA and PennyMac is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 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 CHINA HUARONG i.e., CHINA HUARONG and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between CHINA HUARONG and PennyMac Mortgage
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to under-perform the PennyMac Mortgage. In addition to that, CHINA HUARONG is 13.96 times more volatile than PennyMac Mortgage Investment. It trades about -0.03 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 Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| PennyMac Mortgage |
CHINA HUARONG and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and PennyMac Mortgage
The main advantage of trading using opposite CHINA HUARONG and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG 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.| CHINA HUARONG vs. WILLIS LEASE FIN | CHINA HUARONG vs. SAFETY MEDICAL PROD | CHINA HUARONG vs. AVITA Medical | CHINA HUARONG vs. CarsalesCom |
| 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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