Correlation Between PennyMac Mortgage and Aurelia Metals

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

Diversification Opportunities for PennyMac Mortgage and Aurelia Metals

0.38

Correlation Coefficient

PennyMac Mortgage  Aurelia Metals

Weak diversification

The 3 months correlation between PennyMac and Aurelia is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals 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 Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Aurelia Metals go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Aurelia Metals

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to under-perform the Aurelia Metals. But the stock apears to be less risky and, when comparing its historical volatility, PennyMac Mortgage Investment is 4.78 times less risky than Aurelia Metals. The stock trades about 0.0 of its potential returns per unit of risk. The Aurelia Metals Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Aurelia Metals Limited on October 22, 2024 and sell it today you would lose (1.00) from holding Aurelia Metals Limited or give up 8.33% of portfolio value over 90 days.

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

PennyMac Mortgage Investment  vs.  Aurelia Metals Limited

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Aurelia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PennyMac Mortgage and Aurelia Metals

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

The idea behind PennyMac Mortgage Investment and Aurelia Metals Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.