Correlation Between Virtus Investment and PennyMac Mortgage

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

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

Diversification Opportunities for Virtus Investment and PennyMac Mortgage

-0.58

Correlation Coefficient

Virtus Investment  PennyMac Mortgage

Excellent diversification

The 3 months correlation between Virtus and PennyMac is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Investment Partners and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and Virtus Investment 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 Virtus Investment Partners 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 Virtus Investment i.e., Virtus Investment and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between Virtus Investment and PennyMac Mortgage

Assuming the 90 days horizon Virtus Investment Partners is expected to under-perform the PennyMac Mortgage. In addition to that, Virtus Investment is 1.42 times more volatile than PennyMac Mortgage Investment. It trades about -0.26 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.11 per unit of volatility. If you would invest  1,257  in PennyMac Mortgage Investment on December 1, 2024 and sell it today you would earn a total of  103.00  from holding PennyMac Mortgage Investment or generate 8.19% return on investment over 90 days.

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

Virtus Investment Partners  vs.  PennyMac Mortgage Investment

Virtus Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Investment Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PennyMac Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennyMac Mortgage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Virtus Investment and PennyMac Mortgage

The main advantage of trading using opposite Virtus Investment and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Investment 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 Virtus Investment Partners 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.