Correlation Between PennyMac Mortgage and AGNC Investment

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

Diversification Opportunities for PennyMac Mortgage and AGNC Investment

-0.32

Correlation Coefficient

PennyMac Mortgage  AGNC Investment

Very good diversification

The 3 months correlation between PennyMac and AGNC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and AGNC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGNC Investment 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 AGNC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGNC Investment Corp has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and AGNC Investment go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and AGNC Investment

Considering the 90-day investment horizon PennyMac Mortgage Investment is expected to under-perform the AGNC Investment. In addition to that, PennyMac Mortgage is 1.96 times more volatile than AGNC Investment Corp. It trades about -0.19 of its total potential returns per unit of risk. AGNC Investment Corp is currently generating about -0.19 per unit of volatility. If you would invest  2,559  in AGNC Investment Corp on September 26, 2024 and sell it today you would lose (52.00) from holding AGNC Investment Corp or give up 2.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

PennyMac Mortgage Investment  vs.  AGNC Investment 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 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.

AGNC Investment Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, AGNC Investment is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PennyMac Mortgage and AGNC Investment

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

The idea behind PennyMac Mortgage Investment and AGNC Investment 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.