Can any of the company-specific risk be diversified away by investing in both Asm Pacific and Entegris 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 Entegris 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 Entegris, you can compare the effects of market volatilities on Asm Pacific and Entegris 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 Entegris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asm Pacific and Entegris.
Diversification Opportunities for Asm Pacific and Entegris
The 3 months correlation between Asm and Entegris is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Asm Pacific Technology and Entegris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entegris 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 Entegris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entegris has no effect on the direction of Asm Pacific i.e., Asm Pacific and Entegris go up and down completely randomly.
Assuming the 90 days horizon Asm Pacific Technology is expected to under-perform the Entegris. In addition to that, Asm Pacific is 1.47 times more volatile than Entegris. It trades about -0.12 of its total potential returns per unit of risk. Entegris is currently generating about -0.15 per unit of volatility. If you would invest 13,390 in Entegris on March 6, 2024 and sell it today you would lose (781.00) from holding Entegris or give up 5.83% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Asm Pacific Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Asm Pacific may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Over the last 90 days Entegris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.