Correlation Between PennyMac Mortgage and Keck Seng

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

Diversification Opportunities for PennyMac Mortgage and Keck Seng

0.49

Correlation Coefficient

PennyMac Mortgage  Keck Seng

Very weak diversification

The 3 months correlation between PennyMac and Keck is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Mortgage Investment and Keck Seng Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keck Seng Investments 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 Keck Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keck Seng Investments has no effect on the direction of PennyMac Mortgage i.e., PennyMac Mortgage and Keck Seng go up and down completely randomly.

Pair Corralation between PennyMac Mortgage and Keck Seng

Assuming the 90 days horizon PennyMac Mortgage Investment is expected to under-perform the Keck Seng. But the stock apears to be less risky and, when comparing its historical volatility, PennyMac Mortgage Investment is 2.47 times less risky than Keck Seng. The stock trades about -0.37 of its potential returns per unit of risk. The Keck Seng Investments is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Keck Seng Investments on January 10, 2025 and sell it today you would lose (3.00) from holding Keck Seng Investments or give up 11.11% 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.  Keck Seng Investments

PennyMac Mortgage

Risk-Adjusted Performance

Very Weak

Over the last 90 days PennyMac Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Keck Seng Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Keck Seng Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Keck Seng is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PennyMac Mortgage and Keck Seng

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

The idea behind PennyMac Mortgage Investment and Keck Seng Investments 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.