Correlation Between PennyMac Mortgage and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on PennyMac Mortgage and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and STMicroelectronics.
Diversification Opportunities for PennyMac Mortgage and STMicroelectronics
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between PennyMac and STMicroelectronics is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and STMicroelectronics go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and STMicroelectronics
Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.69 times more return on investment than STMicroelectronics. However, PennyMac Mortgage Investment is 1.44 times less risky than STMicroelectronics. It trades about 0.05 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.06 per unit of risk. If you would invest 959.00 in PennyMac Mortgage Investment on September 30, 2024 and sell it today you would earn a total of 251.00 from holding PennyMac Mortgage Investment or generate 26.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
PennyMac Mortgage Investment vs. STMicroelectronics NV
Performance |
Timeline |
PennyMac Mortgage |
STMicroelectronics |
PennyMac Mortgage and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PennyMac Mortgage and STMicroelectronics
The main advantage of trading using opposite PennyMac Mortgage and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.PennyMac Mortgage vs. TITANIUM TRANSPORTGROUP | PennyMac Mortgage vs. JD SPORTS FASH | PennyMac Mortgage vs. Strategic Investments AS | PennyMac Mortgage vs. Apollo Investment Corp |
STMicroelectronics vs. Broadcom | STMicroelectronics vs. Texas Instruments Incorporated | STMicroelectronics vs. QUALCOMM Incorporated | STMicroelectronics vs. Advanced Micro Devices |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Fundamental Analysis View fundamental data based on most recent published financial statements | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Global Correlations Find global opportunities by holding instruments from different markets |