Correlation Between BJs Restaurants and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants 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 BJs Restaurants and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and PennyMac Mortgage Investment, you can compare the effects of market volatilities on BJs Restaurants 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 BJs Restaurants with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and PennyMac Mortgage.
Diversification Opportunities for BJs Restaurants and PennyMac Mortgage
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BJs and PennyMac is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants i.e., BJs Restaurants and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between BJs Restaurants and PennyMac Mortgage
Assuming the 90 days trading horizon BJs Restaurants is expected to under-perform the PennyMac Mortgage. But the stock apears to be less risky and, when comparing its historical volatility, BJs Restaurants is 1.15 times less risky than PennyMac Mortgage. The stock trades about -0.07 of its potential returns per unit of risk. The PennyMac Mortgage Investment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,220 in PennyMac Mortgage Investment on November 5, 2024 and sell it today you would earn a total of 40.00 from holding PennyMac Mortgage Investment or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. PennyMac Mortgage Investment
Performance |
| Timeline |
| BJs Restaurants |
| PennyMac Mortgage |
BJs Restaurants and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and PennyMac Mortgage
The main advantage of trading using opposite BJs Restaurants and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants 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.| BJs Restaurants vs. SIVERS SEMICONDUCTORS AB | BJs Restaurants vs. NorAm Drilling AS | BJs Restaurants vs. Volkswagen AG | BJs Restaurants vs. Darden Restaurants |
| PennyMac Mortgage vs. Guangdong Investment Limited | PennyMac Mortgage vs. ELMOS SEMICONDUCTOR | PennyMac Mortgage vs. Nordic Semiconductor ASA | PennyMac Mortgage vs. Lattice Semiconductor |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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