Correlation Between PennyMac Mortgage and REGAL ASIAN

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

Diversification Opportunities for PennyMac Mortgage and REGAL ASIAN

0.7

Correlation Coefficient

PennyMac Mortgage  REGAL ASIAN

Poor diversification

The 3 months correlation between PennyMac and REGAL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and REGAL ASIAN INVESTMENTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REGAL ASIAN INVESTMENTS 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 REGAL ASIAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REGAL ASIAN INVESTMENTS has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and REGAL ASIAN go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and REGAL ASIAN

Assuming the 90 days horizon PennyMac Mortgage is expected to generate 1.04 times less return on investment than REGAL ASIAN. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.34 times less risky than REGAL ASIAN. It trades about 0.1 of its potential returns per unit of risk. REGAL ASIAN INVESTMENTS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  122.00  in REGAL ASIAN INVESTMENTS on November 29, 2024 and sell it today you would earn a total of  9.00  from holding REGAL ASIAN INVESTMENTS or generate 7.38% return on investment over 90 days.

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

PennyMac Mortgage Investment  vs.  REGAL ASIAN INVESTMENTS

PennyMac Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennyMac Mortgage may actually be approaching a critical reversion point that can send shares even higher in March 2025.

REGAL ASIAN INVESTMENTS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in REGAL ASIAN INVESTMENTS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, REGAL ASIAN may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with PennyMac Mortgage and REGAL ASIAN

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

The idea behind PennyMac Mortgage Investment and REGAL ASIAN INVESTMENTS 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.