Correlation Between Alfa Financial and Ultra Clean

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

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

Diversification Opportunities for Alfa Financial and Ultra Clean

-0.3

Correlation Coefficient

Alfa Financial  Ultra Clean

Very good diversification

The 3 months correlation between Alfa and Ultra is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software 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 Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and Ultra Clean go up and down completely randomly.

Pair Corralation between Alfa Financial and Ultra Clean

Assuming the 90 days trading horizon Alfa Financial Software is expected to under-perform the Ultra Clean. But the stock apears to be less risky and, when comparing its historical volatility, Alfa Financial Software is 1.72 times less risky than Ultra Clean. The stock trades about -0.05 of its potential returns per unit of risk. The Ultra Clean Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,240  in Ultra Clean Holdings on October 24, 2024 and sell it today you would earn a total of  440.00  from holding Ultra Clean Holdings or generate 13.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alfa Financial Software  vs.  Ultra Clean Holdings

Alfa Financial Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Financial Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ultra Clean Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ultra Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfa Financial and Ultra Clean

The main advantage of trading using opposite Alfa Financial and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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 Alfa Financial Software 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.