Correlation Between ASM International and PennyMac Mortgage

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Can any of the company-specific risk be diversified away by investing in both ASM International 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 ASM International and PennyMac Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASM International NV and PennyMac Mortgage Investment, you can compare the effects of market volatilities on ASM International 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 ASM International with a short position of PennyMac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASM International and PennyMac Mortgage.

Diversification Opportunities for ASM International and PennyMac Mortgage

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between ASM and PennyMac is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ASM International NV and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and ASM International 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 ASM International NV 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 ASM International i.e., ASM International and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between ASM International and PennyMac Mortgage

Assuming the 90 days horizon ASM International NV is expected to under-perform the PennyMac Mortgage. In addition to that, ASM International is 3.11 times more volatile than PennyMac Mortgage Investment. It trades about -0.08 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.07 per unit of volatility. If you would invest  1,231  in PennyMac Mortgage Investment on September 3, 2024 and sell it today you would earn a total of  49.00  from holding PennyMac Mortgage Investment or generate 3.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ASM International NV  vs.  PennyMac Mortgage Investment

 Performance 
       Timeline  
ASM International 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days ASM International NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
PennyMac Mortgage 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PennyMac Mortgage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ASM International and PennyMac Mortgage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ASM International and PennyMac Mortgage

The main advantage of trading using opposite ASM International and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASM International 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.
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The idea behind ASM International NV 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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