Correlation Between PennyMac Mortgage and Goldman Sachs

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

Diversification Opportunities for PennyMac Mortgage and Goldman Sachs

-0.1

Correlation Coefficient

PennyMac Mortgage  Goldman Sachs

Good diversification

The 3 months correlation between PennyMac and Goldman is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Goldman Sachs go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Goldman Sachs

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.62 times more return on investment than Goldman Sachs. However, PennyMac Mortgage Investment is 1.62 times less risky than Goldman Sachs. It trades about 0.15 of its potential returns per unit of risk. The Goldman Sachs is currently generating about -0.03 per unit of risk. If you would invest  1,210  in PennyMac Mortgage Investment on December 24, 2024 and sell it today you would earn a total of  150.00  from holding PennyMac Mortgage Investment or generate 12.4% return on investment over 90 days.

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

PennyMac Mortgage Investment  vs.  The Goldman Sachs

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 uncertain basic indicators, PennyMac Mortgage reported solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Goldman Sachs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Goldman Sachs 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 Goldman Sachs

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

The idea behind PennyMac Mortgage Investment and The Goldman Sachs 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.