Correlation Between AGNC Investment and PennyMac Mortgage

Can any of the company-specific risk be diversified away by investing in both AGNC Investment and PennyMac Mortgage 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 AGNC Investment and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGNC Investment Corp and PennyMac Mortgage Investment, you can compare the effects of market volatilities on AGNC Investment and PennyMac Mortgage 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 AGNC Investment with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and PennyMac Mortgage.

Diversification Opportunities for AGNC Investment and PennyMac Mortgage

0.19

Correlation Coefficient

AGNC Investment  PennyMac Mortgage

Average diversification

The 3 months correlation between AGNC and PennyMac is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and AGNC Investment 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 AGNC Investment Corp are associated (or correlated) with PennyMac Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Mortgage has no effect on the direction of AGNC Investment i.e., AGNC Investment and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between AGNC Investment and PennyMac Mortgage

Assuming the 90 days horizon AGNC Investment Corp is expected to generate 0.34 times more return on investment than PennyMac Mortgage. However, AGNC Investment Corp is 2.92 times less risky than PennyMac Mortgage. It trades about -0.03 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about -0.01 per unit of risk. If you would invest  2,564  in AGNC Investment Corp on September 10, 2024 and sell it today you would lose (5.00) from holding AGNC Investment Corp or give up 0.2% of portfolio value over 90 days.

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

AGNC Investment Corp  vs.  PennyMac Mortgage Investment

AGNC Investment Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGNC Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 somewhat strong basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AGNC Investment and PennyMac Mortgage

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

The idea behind AGNC Investment Corp and PennyMac Mortgage Investment 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.