Correlation Between Fanuc and PennyMac Mortgage

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

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

Diversification Opportunities for Fanuc and PennyMac Mortgage

0.25

Correlation Coefficient

Fanuc  PennyMac Mortgage

Modest diversification

The 3 months correlation between Fanuc and PennyMac is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fanuc and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Fanuc 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 Fanuc 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 Fanuc i.e., Fanuc and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between Fanuc and PennyMac Mortgage

Assuming the 90 days horizon Fanuc is expected to generate 1.17 times less return on investment than PennyMac Mortgage. In addition to that, Fanuc is 1.34 times more volatile than PennyMac Mortgage Investment. It trades about 0.1 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.15 per unit of volatility. If you would invest  1,189  in PennyMac Mortgage Investment on December 22, 2024 and sell it today you would earn a total of  151.00  from holding PennyMac Mortgage Investment or generate 12.7% return on investment over 90 days.

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

Fanuc  vs.  PennyMac Mortgage Investment

Fanuc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fanuc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fanuc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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

Pair Trading with Fanuc and PennyMac Mortgage

The main advantage of trading using opposite Fanuc and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fanuc 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 Fanuc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .