Correlation Between PennyMac Mortgage and Apollo Medical

Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Apollo Medical 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 PennyMac Mortgage and Apollo Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PennyMac Mortgage Investment and Apollo Medical Holdings, you can compare the effects of market volatilities on PennyMac Mortgage and Apollo Medical 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 PennyMac Mortgage with a short position of Apollo Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Apollo Medical.

Diversification Opportunities for PennyMac Mortgage and Apollo Medical

0.42

Correlation Coefficient

PennyMac Mortgage  Apollo Medical

Very weak diversification

The 3 months correlation between PennyMac and Apollo is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Apollo Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Medical Holdings and PennyMac Mortgage 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 PennyMac Mortgage Investment are associated (or correlated) with Apollo Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Medical Holdings has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Apollo Medical go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Apollo Medical

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.8 times more return on investment than Apollo Medical. However, PennyMac Mortgage Investment is 1.25 times less risky than Apollo Medical. It trades about 0.02 of its potential returns per unit of risk. Apollo Medical Holdings is currently generating about 0.01 per unit of risk. If you would invest  1,040  in PennyMac Mortgage Investment on October 13, 2024 and sell it today you would earn a total of  150.00  from holding PennyMac Mortgage Investment or generate 14.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

PennyMac Mortgage Investment  vs.  Apollo Medical Holdings

PennyMac Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennyMac Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Apollo Medical Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apollo Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PennyMac Mortgage and Apollo Medical

The main advantage of trading using opposite PennyMac Mortgage and Apollo Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Apollo Medical 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 Apollo Medical will offset losses from the drop in Apollo Medical's long position.

The idea behind PennyMac Mortgage Investment and Apollo Medical Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .