Correlation Between DT Cloud and PennyMac Mortgage

Can any of the company-specific risk be diversified away by investing in both DT Cloud and PennyMac Mortgage 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 DT Cloud and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DT Cloud Acquisition and PennyMac Mortgage Investment, you can compare the effects of market volatilities on DT Cloud and PennyMac Mortgage 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 DT Cloud with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of DT Cloud and PennyMac Mortgage.

Diversification Opportunities for DT Cloud and PennyMac Mortgage

-0.31

Correlation Coefficient

DT Cloud  PennyMac Mortgage

Very good diversification

The 3 months correlation between DYCQ and PennyMac is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding DT Cloud Acquisition and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and DT Cloud 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 DT Cloud Acquisition are associated (or correlated) with PennyMac Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Mortgage has no effect on the direction of DT Cloud i.e., DT Cloud and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between DT Cloud and PennyMac Mortgage

Given the investment horizon of 90 days DT Cloud Acquisition is expected to generate 0.22 times more return on investment than PennyMac Mortgage. However, DT Cloud Acquisition is 4.63 times less risky than PennyMac Mortgage. It trades about 0.1 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.0 per unit of risk. If you would invest  1,030  in DT Cloud Acquisition on August 31, 2024 and sell it today you would earn a total of  12.00  from holding DT Cloud Acquisition or generate 1.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

DT Cloud Acquisition  vs.  PennyMac Mortgage Investment

DT Cloud Acquisition

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DT Cloud Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, DT Cloud is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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. In spite of comparatively stable primary indicators, PennyMac Mortgage is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DT Cloud and PennyMac Mortgage

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

The idea behind DT Cloud Acquisition and PennyMac Mortgage Investment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.