Correlation Between AG Mortgage and PennyMac Mortgage

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

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

Diversification Opportunities for AG Mortgage and PennyMac Mortgage

0.79

Correlation Coefficient

AG Mortgage  PennyMac Mortgage

Poor diversification

The 3 months correlation between MITT and PennyMac is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and AG 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 AG Mortgage Investment 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 AG Mortgage i.e., AG Mortgage and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between AG Mortgage and PennyMac Mortgage

Given the investment horizon of 90 days AG Mortgage Investment is expected to under-perform the PennyMac Mortgage. In addition to that, AG Mortgage is 1.43 times more volatile than PennyMac Mortgage Investment. It trades about -0.06 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.0 per unit of volatility. If you would invest  1,356  in PennyMac Mortgage Investment on August 31, 2024 and sell it today you would earn a total of  0.00  from holding PennyMac Mortgage Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

AG Mortgage Investment  vs.  PennyMac Mortgage Investment

AG Mortgage Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AG Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AG Mortgage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PennyMac Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennyMac Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, PennyMac Mortgage is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AG Mortgage and PennyMac Mortgage

The main advantage of trading using opposite AG Mortgage and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage 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 AG Mortgage Investment 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.