Correlation Between PennyMac Mortgage and Société Générale

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

Diversification Opportunities for PennyMac Mortgage and Société Générale

0.93

Correlation Coefficient

PennyMac Mortgage  Société Générale

Almost no diversification

The 3 months correlation between PennyMac and Société is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Socit Gnrale Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit Gnrale Socit 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 Société Générale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit Gnrale Socit has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Société Générale go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Société Générale

Assuming the 90 days horizon PennyMac Mortgage is expected to generate 3.39 times less return on investment than Société Générale. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.93 times less risky than Société Générale. It trades about 0.16 of its potential returns per unit of risk. Socit Gnrale Socit is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,693  in Socit Gnrale Socit on December 29, 2024 and sell it today you would earn a total of  1,562  from holding Socit Gnrale Socit or generate 58.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

PennyMac Mortgage Investment  vs.  Socit Gnrale Socit

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 12 (%) 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.

Socit Gnrale Socit

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Socit Gnrale Socit are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Société Générale unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennyMac Mortgage and Société Générale

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

The idea behind PennyMac Mortgage Investment and Socit Gnrale Socit 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 Stocks Directory module to find actively traded stocks across global markets.