Correlation Between ULTRA CLEAN and PennyMac Mortgage

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

Diversification Opportunities for ULTRA CLEAN and PennyMac Mortgage

ULTRAPennyMacDiversified AwayULTRAPennyMacDiversified Away100%
0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between ULTRA and PennyMac is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage and ULTRA CLEAN 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 ULTRA CLEAN HLDGS 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 ULTRA CLEAN i.e., ULTRA CLEAN and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and PennyMac Mortgage

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 1.18 times less return on investment than PennyMac Mortgage. In addition to that, ULTRA CLEAN is 1.86 times more volatile than PennyMac Mortgage Investment. It trades about 0.18 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.4 per unit of volatility. If you would invest  1,180  in PennyMac Mortgage Investment on November 27, 2024 and sell it today you would earn a total of  140.00  from holding PennyMac Mortgage Investment or generate 11.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ULTRA CLEAN HLDGS  vs.  PennyMac Mortgage Investment

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 051015
JavaScript chart by amCharts 3.21.15UCE 8PM
       Timeline  
ULTRA CLEAN HLDGS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ULTRA CLEAN HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ULTRA CLEAN is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb32333435363738
PennyMac Mortgage 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PennyMac Mortgage may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.81212.212.412.612.81313.2

ULTRA CLEAN and PennyMac Mortgage Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.98-6.72-4.47-2.220.03842.34.66.99.2 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15UCE 8PM
       Returns  

Pair Trading with ULTRA CLEAN and PennyMac Mortgage

The main advantage of trading using opposite ULTRA CLEAN and PennyMac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ULTRA CLEAN 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.
The idea behind ULTRA CLEAN HLDGS 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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