Correlation Between PennyMac Mortgage and AGNC INVESTMENT

Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and AGNC INVESTMENT 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 AGNC INVESTMENT 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 AGNC INVESTMENT, you can compare the effects of market volatilities on PennyMac Mortgage and AGNC INVESTMENT 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 AGNC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and AGNC INVESTMENT.

Diversification Opportunities for PennyMac Mortgage and AGNC INVESTMENT

0.31

Correlation Coefficient

PennyMac Mortgage  AGNC INVESTMENT

Weak diversification

The 3 months correlation between PennyMac and AGNC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and AGNC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGNC INVESTMENT 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 AGNC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGNC INVESTMENT has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and AGNC INVESTMENT go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and AGNC INVESTMENT

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.78 times more return on investment than AGNC INVESTMENT. However, PennyMac Mortgage Investment is 1.28 times less risky than AGNC INVESTMENT. It trades about 0.08 of its potential returns per unit of risk. AGNC INVESTMENT is currently generating about 0.05 per unit of risk. If you would invest  1,212  in PennyMac Mortgage Investment on September 12, 2024 and sell it today you would earn a total of  58.00  from holding PennyMac Mortgage Investment or generate 4.79% return on investment over 90 days.

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

PennyMac Mortgage Investment  vs.  AGNC INVESTMENT

PennyMac Mortgage

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

AGNC INVESTMENT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC INVESTMENT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AGNC INVESTMENT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PennyMac Mortgage and AGNC INVESTMENT

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

The idea behind PennyMac Mortgage Investment and AGNC INVESTMENT 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.