Correlation Between PennyMac Mortgage and PPHE HOTEL

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

Diversification Opportunities for PennyMac Mortgage and PPHE HOTEL

0.01

Correlation Coefficient

PennyMac Mortgage  PPHE HOTEL

Significant diversification

The 3 months correlation between PennyMac and PPHE is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and PPHE HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE HOTEL GROUP 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 PPHE HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE HOTEL GROUP has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and PPHE HOTEL go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and PPHE HOTEL

Assuming the 90 days horizon PennyMac Mortgage is expected to generate 51.12 times less return on investment than PPHE HOTEL. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.62 times less risky than PPHE HOTEL. It trades about 0.0 of its potential returns per unit of risk. PPHE HOTEL GROUP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,470  in PPHE HOTEL GROUP on September 29, 2024 and sell it today you would earn a total of  150.00  from holding PPHE HOTEL GROUP or generate 10.2% return on investment over 90 days.

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

PennyMac Mortgage Investment  vs.  PPHE HOTEL GROUP

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. Despite nearly stable basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PPHE HOTEL GROUP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE HOTEL GROUP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PPHE HOTEL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PennyMac Mortgage and PPHE HOTEL

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

The idea behind PennyMac Mortgage Investment and PPHE HOTEL GROUP 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.