Correlation Between PennyMac Mortgage and Apollo Investment

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

Diversification Opportunities for PennyMac Mortgage and Apollo Investment

0.44

Correlation Coefficient

PennyMac Mortgage  Apollo Investment

Very weak diversification

The 3 months correlation between PennyMac and Apollo is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Apollo Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo 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 Apollo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Investment Corp has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Apollo Investment go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Apollo Investment

Assuming the 90 days horizon PennyMac Mortgage is expected to generate 2.13 times less return on investment than Apollo Investment. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 1.07 times less risky than Apollo Investment. It trades about 0.07 of its potential returns per unit of risk. Apollo Investment Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,217  in Apollo Investment Corp on September 3, 2024 and sell it today you would earn a total of  109.00  from holding Apollo Investment Corp or generate 8.96% 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.  Apollo Investment Corp

PennyMac Mortgage

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Apollo Investment Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Investment Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Apollo Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PennyMac Mortgage and Apollo Investment

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

The idea behind PennyMac Mortgage Investment and Apollo 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.