Correlation Between PennyMac Mortgage and Sachem Capital
Can any of the company-specific risk be diversified away by investing in both PennyMac Mortgage and Sachem Capital 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 Sachem Capital 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 Sachem Capital Corp, you can compare the effects of market volatilities on PennyMac Mortgage and Sachem Capital 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Mortgage and Sachem Capital.
Diversification Opportunities for PennyMac Mortgage and Sachem Capital
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennyMac and Sachem is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Sachem Capital go up and down completely randomly.
Pair Corralation between PennyMac Mortgage and Sachem Capital
Assuming the 90 days trading horizon PennyMac Mortgage Investment is expected to under-perform the Sachem Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, PennyMac Mortgage Investment is 5.77 times less risky than Sachem Capital. The preferred stock trades about -0.5 of its potential returns per unit of risk. The Sachem Capital Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 1,855 in Sachem Capital Corp on September 26, 2024 and sell it today you would lose (111.00) from holding Sachem Capital Corp or give up 5.98% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
PennyMac Mortgage Investment vs. Sachem Capital Corp
Performance |
Timeline |
PennyMac Mortgage |
Sachem Capital Corp |
PennyMac Mortgage and Sachem Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PennyMac Mortgage and Sachem Capital
The main advantage of trading using opposite PennyMac Mortgage and Sachem Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Mortgage position performs unexpectedly, Sachem Capital 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 Sachem Capital will offset losses from the drop in Sachem Capital's long position.PennyMac Mortgage vs. KKR Real Estate | PennyMac Mortgage vs. ACRES Commercial Realty | PennyMac Mortgage vs. Arbor Realty Trust |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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