Correlation Between ASM Pacific and Photronics

Can any of the company-specific risk be diversified away by investing in both ASM Pacific and Photronics 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 Pacific and Photronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASM Pacific Technology and Photronics, you can compare the effects of market volatilities on ASM Pacific and Photronics 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 Pacific with a short position of Photronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASM Pacific and Photronics.

Diversification Opportunities for ASM Pacific and Photronics

0.35

Correlation Coefficient

ASM Pacific  Photronics

Weak diversification

The 3 months correlation between ASM and Photronics is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ASM Pacific Technology and Photronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photronics and ASM Pacific 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 Pacific Technology are associated (or correlated) with Photronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photronics has no effect on the direction of ASM Pacific i.e., ASM Pacific and Photronics go up and down completely randomly.

Pair Corralation between ASM Pacific and Photronics

If you would invest  2,393  in Photronics on October 1, 2024 and sell it today you would lose (1.00) from holding Photronics or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

ASM Pacific Technology  vs.  Photronics

ASM Pacific Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Photronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Photronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ASM Pacific and Photronics

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

The idea behind ASM Pacific Technology and Photronics 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.