Correlation Between PennyMac Mortgage and New York

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

Diversification Opportunities for PennyMac Mortgage and New York

0.66

Correlation Coefficient

PennyMac Mortgage  New York

Poor diversification

The 3 months correlation between PennyMac and New is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Mortgage 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and New York go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and New York

Assuming the 90 days trading horizon PennyMac Mortgage Investment is expected to generate 1.38 times more return on investment than New York. However, PennyMac Mortgage is 1.38 times more volatile than New York Mortgage. It trades about 0.09 of its potential returns per unit of risk. New York Mortgage is currently generating about 0.08 per unit of risk. If you would invest  1,998  in PennyMac Mortgage Investment on August 31, 2024 and sell it today you would earn a total of  82.00  from holding PennyMac Mortgage Investment or generate 4.1% 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.  New York Mortgage

PennyMac Mortgage

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

New York Mortgage

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New York Mortgage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, New York is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PennyMac Mortgage and New York

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

The idea behind PennyMac Mortgage Investment and New York Mortgage 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.