Correlation Between COSTCO WHOLESALE and PennyMac Mortgage
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE 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 COSTCO WHOLESALE and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSTCO WHOLESALE CDR and PennyMac Mortgage Investment, you can compare the effects of market volatilities on COSTCO WHOLESALE 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 COSTCO WHOLESALE with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and PennyMac Mortgage.
Diversification Opportunities for COSTCO WHOLESALE and PennyMac Mortgage
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between COSTCO and PennyMac is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE i.e., COSTCO WHOLESALE and PennyMac Mortgage go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and PennyMac Mortgage
Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 0.75 times more return on investment than PennyMac Mortgage. However, COSTCO WHOLESALE CDR is 1.33 times less risky than PennyMac Mortgage. It trades about 0.06 of its potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.04 per unit of risk. If you would invest 1,583 in COSTCO WHOLESALE CDR on February 16, 2024 and sell it today you would earn a total of 837.00 from holding COSTCO WHOLESALE CDR or generate 52.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
COSTCO WHOLESALE CDR vs. PennyMac Mortgage Investment
Performance |
Timeline |
COSTCO WHOLESALE CDR |
PennyMac Mortgage |
COSTCO WHOLESALE and PennyMac Mortgage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with COSTCO WHOLESALE and PennyMac Mortgage
The main advantage of trading using opposite COSTCO WHOLESALE and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE 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.COSTCO WHOLESALE vs. Coor Service Management | COSTCO WHOLESALE vs. Sims Metal Management | COSTCO WHOLESALE vs. Corporate Travel Management | COSTCO WHOLESALE vs. QBE Insurance Group |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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