Correlation Between PennyMac Mortgage and MEITUAN UNSPADR2B

Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and MEITUAN UNSPADR2B 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 MEITUAN UNSPADR2B 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 MEITUAN UNSPADR2B, you can compare the effects of market volatilities on PennyMac Mortgage and MEITUAN UNSPADR2B 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 MEITUAN UNSPADR2B. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and MEITUAN UNSPADR2B.

Diversification Opportunities for PennyMac Mortgage and MEITUAN UNSPADR2B

0.41

Correlation Coefficient

PennyMac Mortgage  MEITUAN UNSPADR2B

Very weak diversification

The 3 months correlation between PennyMac and MEITUAN is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and MEITUAN UNSPADR2B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEITUAN UNSPADR2B 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 MEITUAN UNSPADR2B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEITUAN UNSPADR2B has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and MEITUAN UNSPADR2B go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and MEITUAN UNSPADR2B

Assuming the 90 days horizon PennyMac Mortgage is expected to generate 13.29 times less return on investment than MEITUAN UNSPADR2B. But when comparing it to its historical volatility, PennyMac Mortgage Investment is 6.29 times less risky than MEITUAN UNSPADR2B. It trades about 0.06 of its potential returns per unit of risk. MEITUAN UNSPADR2B is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,840  in MEITUAN UNSPADR2B on September 14, 2024 and sell it today you would earn a total of  1,200  from holding MEITUAN UNSPADR2B or generate 42.25% 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.  MEITUAN UNSPADR2B

PennyMac Mortgage

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 4 (%) 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.

MEITUAN UNSPADR2B

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MEITUAN UNSPADR2B are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, MEITUAN UNSPADR2B reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennyMac Mortgage and MEITUAN UNSPADR2B

The main advantage of trading using opposite PennyMac Mortgage and MEITUAN UNSPADR2B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, MEITUAN UNSPADR2B 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 MEITUAN UNSPADR2B will offset losses from the drop in MEITUAN UNSPADR2B's long position.

The idea behind PennyMac Mortgage Investment and MEITUAN UNSPADR2B 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.