Correlation Between PennyMac Mortgage and THORNEY TECHS

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

Diversification Opportunities for PennyMac Mortgage and THORNEY TECHS

0.23

Correlation Coefficient

PennyMac Mortgage  THORNEY TECHS

Modest diversification

The 3 months correlation between PennyMac and THORNEY is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and THORNEY TECHS go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and THORNEY TECHS

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to generate 0.19 times more return on investment than THORNEY TECHS. However, PennyMac Mortgage Investment is 5.38 times less risky than THORNEY TECHS. It trades about -0.19 of its potential returns per unit of risk. THORNEY TECHS LTD is currently generating about -0.07 per unit of risk. If you would invest  1,280  in PennyMac Mortgage Investment on September 24, 2024 and sell it today you would lose (50.00) from holding PennyMac Mortgage Investment or give up 3.91% of portfolio value over 90 days.

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

PennyMac Mortgage Investment  vs.  THORNEY TECHS LTD

PennyMac Mortgage

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 1 (%) 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.

THORNEY TECHS LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in THORNEY TECHS LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, THORNEY TECHS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PennyMac Mortgage and THORNEY TECHS

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

The idea behind PennyMac Mortgage Investment and THORNEY TECHS LTD 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.