Correlation Between VIRG NATL and Ultra Clean

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

By analyzing existing cross correlation between VIRG NATL BANKSH and Ultra Clean Holdings, you can compare the effects of market volatilities on VIRG NATL and Ultra Clean 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 VIRG NATL with a short position of Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIRG NATL and Ultra Clean.

Diversification Opportunities for VIRG NATL and Ultra Clean

0.26

Correlation Coefficient

VIRG NATL  Ultra Clean

Modest diversification

The 3 months correlation between VIRG and Ultra is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding VIRG NATL BANKSH and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings and VIRG NATL 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 VIRG NATL BANKSH are associated (or correlated) with Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of VIRG NATL i.e., VIRG NATL and Ultra Clean go up and down completely randomly.

Pair Corralation between VIRG NATL and Ultra Clean

Assuming the 90 days horizon VIRG NATL BANKSH is expected to generate 0.48 times more return on investment than Ultra Clean. However, VIRG NATL BANKSH is 2.1 times less risky than Ultra Clean. It trades about -0.06 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about -0.27 per unit of risk. If you would invest  3,500  in VIRG NATL BANKSH on December 5, 2024 and sell it today you would lose (180.00) from holding VIRG NATL BANKSH or give up 5.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

VIRG NATL BANKSH  vs.  Ultra Clean Holdings

VIRG NATL BANKSH

Risk-Adjusted Performance

Very Weak

Over the last 90 days VIRG NATL BANKSH 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ultra Clean Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Clean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with VIRG NATL and Ultra Clean

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

The idea behind VIRG NATL BANKSH and Ultra Clean Holdings 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.