Correlation Between PennyMac Mortgage and Sachem Capital

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

Diversification Opportunities for PennyMac Mortgage and Sachem Capital

0.72

Correlation Coefficient

PennyMac Mortgage  Sachem Capital

Poor diversification

The 3 months correlation between PennyMac and Sachem is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Sachem Capital go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Sachem Capital

Assuming the 90 days trading horizon PennyMac Mortgage Investment is expected to generate 0.18 times more return on investment than Sachem Capital. However, PennyMac Mortgage Investment is 5.55 times less risky than Sachem Capital. It trades about -0.45 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about -0.14 per unit of risk. If you would invest  2,025  in PennyMac Mortgage Investment on September 27, 2024 and sell it today you would lose (105.00) from holding PennyMac Mortgage Investment or give up 5.19% of portfolio value over 90 days.

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

PennyMac Mortgage Investment  vs.  Sachem Capital Corp

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 latest weak performance, the Preferred Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sachem Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PennyMac Mortgage and Sachem Capital

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

The idea behind PennyMac Mortgage Investment and Sachem Capital Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.