Correlation Between PennyMac Mortgage and Yakult Honsha

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

Diversification Opportunities for PennyMac Mortgage and Yakult Honsha

0.6

Correlation Coefficient

PennyMac Mortgage  Yakult Honsha

Poor diversification

The 3 months correlation between PennyMac and Yakult is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Yakult Honsha CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yakult Honsha CoLtd 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 Yakult Honsha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yakult Honsha CoLtd has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Yakult Honsha go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Yakult Honsha

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.73 times more return on investment than Yakult Honsha. However, PennyMac Mortgage Investment is 1.37 times less risky than Yakult Honsha. It trades about 0.16 of its potential returns per unit of risk. Yakult Honsha CoLtd is currently generating about 0.01 per unit of risk. If you would invest  1,190  in PennyMac Mortgage Investment on December 30, 2024 and sell it today you would earn a total of  170.00  from holding PennyMac Mortgage Investment or generate 14.29% 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.  Yakult Honsha CoLtd

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

Yakult Honsha CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yakult Honsha CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Yakult Honsha is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PennyMac Mortgage and Yakult Honsha

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

The idea behind PennyMac Mortgage Investment and Yakult Honsha CoLtd 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.