Correlation Between PennyMac Mortgage and Telephone

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

Diversification Opportunities for PennyMac Mortgage and Telephone

0.59

Correlation Coefficient

PennyMac Mortgage  Telephone

Very weak diversification

The 3 months correlation between PennyMac and Telephone is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Telephone go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Telephone

Assuming the 90 days trading horizon PennyMac Mortgage Investment is expected to generate 0.46 times more return on investment than Telephone. However, PennyMac Mortgage Investment is 2.17 times less risky than Telephone. It trades about -0.03 of its potential returns per unit of risk. Telephone and Data is currently generating about -0.02 per unit of risk. If you would invest  2,035  in PennyMac Mortgage Investment on September 13, 2024 and sell it today you would lose (30.00) from holding PennyMac Mortgage Investment or give up 1.47% of portfolio value over 90 days.

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

PennyMac Mortgage Investment  vs.  Telephone and Data

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 rather sound basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Telephone and Data

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telephone and Data has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Telephone is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PennyMac Mortgage and Telephone

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

The idea behind PennyMac Mortgage Investment and Telephone and Data 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.