Correlation Between Australian Agricultural and ULTRA CLEAN

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

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

Diversification Opportunities for Australian Agricultural and ULTRA CLEAN

0.06

Correlation Coefficient

Australian Agricultural  ULTRA CLEAN

Significant diversification

The 3 months correlation between Australian and ULTRA is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural 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 Australian Agricultural 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 Australian Agricultural 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 Australian Agricultural i.e., Australian Agricultural and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between Australian Agricultural and ULTRA CLEAN

Assuming the 90 days horizon Australian Agricultural is expected to under-perform the ULTRA CLEAN. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 2.15 times less risky than ULTRA CLEAN. The stock trades about -0.02 of its potential returns per unit of risk. The ULTRA CLEAN HLDGS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,080  in ULTRA CLEAN HLDGS on September 19, 2024 and sell it today you would earn a total of  440.00  from holding ULTRA CLEAN HLDGS or generate 14.29% return on investment over 90 days.

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

Australian Agricultural  vs.  ULTRA CLEAN HLDGS

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

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

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ULTRA CLEAN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Agricultural and ULTRA CLEAN

The main advantage of trading using opposite Australian Agricultural and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural 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 Australian Agricultural 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..