Correlation Between PennyMac Mortgage and Angel Oak

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

Diversification Opportunities for PennyMac Mortgage and Angel Oak

0.47

Correlation Coefficient

PennyMac Mortgage  Angel Oak

Very weak diversification

The 3 months correlation between PennyMac and Angel is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Angel Oak Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak 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 Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Mortgage has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Angel Oak go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Angel Oak

Considering the 90-day investment horizon PennyMac Mortgage Investment is expected to generate 0.83 times more return on investment than Angel Oak. However, PennyMac Mortgage Investment is 1.21 times less risky than Angel Oak. It trades about 0.22 of its potential returns per unit of risk. Angel Oak Mortgage is currently generating about 0.1 per unit of risk. If you would invest  1,244  in PennyMac Mortgage Investment on December 28, 2024 and sell it today you would earn a total of  233.00  from holding PennyMac Mortgage Investment or generate 18.73% return on investment over 90 days.

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

PennyMac Mortgage Investment  vs.  Angel Oak Mortgage

PennyMac Mortgage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, PennyMac Mortgage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Angel Oak Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Mortgage are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Angel Oak may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PennyMac Mortgage and Angel Oak

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

The idea behind PennyMac Mortgage Investment and Angel Oak 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.