Correlation Between Adidas AG and ULTRA CLEAN

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

By analyzing existing cross correlation between adidas AG and ULTRA CLEAN HLDGS, you can compare the effects of market volatilities on Adidas AG 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 Adidas AG with a short position of ULTRA CLEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and ULTRA CLEAN.

Diversification Opportunities for Adidas AG and ULTRA CLEAN

0.66

Correlation Coefficient

Adidas AG  ULTRA CLEAN

Poor diversification

The 3 months correlation between Adidas and ULTRA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN HLDGS and Adidas AG 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 adidas AG 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 HLDGS has no effect on the direction of Adidas AG i.e., Adidas AG and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between Adidas AG and ULTRA CLEAN

Assuming the 90 days trading horizon adidas AG is expected to generate 0.61 times more return on investment than ULTRA CLEAN. However, adidas AG is 1.64 times less risky than ULTRA CLEAN. It trades about 0.06 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about 0.0 per unit of risk. If you would invest  10,166  in adidas AG on October 12, 2024 and sell it today you would earn a total of  1,934  from holding adidas AG or generate 19.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.47%
Values	Daily Returns

adidas AG  vs.  ULTRA CLEAN HLDGS

adidas AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Adidas AG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Adidas AG and ULTRA CLEAN

The main advantage of trading using opposite Adidas AG and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG 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 adidas AG and ULTRA CLEAN HLDGS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.