Correlation Between PennyMac Mortgage and Bausch Health

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

Diversification Opportunities for PennyMac Mortgage and Bausch Health

-0.62

Correlation Coefficient

PennyMac Mortgage  Bausch Health

Excellent diversification

The 3 months correlation between PennyMac and Bausch is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies 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 Bausch Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Bausch Health go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Bausch Health

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.46 times more return on investment than Bausch Health. However, PennyMac Mortgage Investment is 2.16 times less risky than Bausch Health. It trades about 0.15 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.05 per unit of risk. If you would invest  1,189  in PennyMac Mortgage Investment on December 22, 2024 and sell it today you would earn a total of  151.00  from holding PennyMac Mortgage Investment or generate 12.7% return on investment over 90 days.

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

PennyMac Mortgage Investment  vs.  Bausch Health Companies

PennyMac Mortgage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennyMac Mortgage reported solid returns over the last few months and may actually be approaching a breakup point.

Bausch Health Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PennyMac Mortgage and Bausch Health

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

The idea behind PennyMac Mortgage Investment and Bausch Health Companies 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.