Correlation Between PennyMac Mortgage and SYSTEMAIR

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

Diversification Opportunities for PennyMac Mortgage and SYSTEMAIR

0.22

Correlation Coefficient

PennyMac Mortgage  SYSTEMAIR

Modest diversification

The 3 months correlation between PennyMac and SYSTEMAIR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and SYSTEMAIR go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and SYSTEMAIR

Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.4 times less return on investment than SYSTEMAIR. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.85 times less risky than SYSTEMAIR. It trades about 0.04 of its potential returns per unit of risk. SYSTEMAIR AB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  406.00  in SYSTEMAIR AB on September 23, 2024 and sell it today you would earn a total of  370.00  from holding SYSTEMAIR AB or generate 91.13% 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.  SYSTEMAIR AB

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.

SYSTEMAIR AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SYSTEMAIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PennyMac Mortgage and SYSTEMAIR

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

The idea behind PennyMac Mortgage Investment and SYSTEMAIR AB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.