Correlation Between BP Prudhoe and ULTRA CLEAN

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

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

Diversification Opportunities for BP Prudhoe and ULTRA CLEAN

0.28

Correlation Coefficient

BP Prudhoe  ULTRA CLEAN

Modest diversification

The 3 months correlation between BMI and ULTRA is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BP Prudhoe Bay 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 BP Prudhoe 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 BP Prudhoe Bay 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 BP Prudhoe i.e., BP Prudhoe and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between BP Prudhoe and ULTRA CLEAN

Assuming the 90 days horizon BP Prudhoe Bay is expected to generate 1.88 times more return on investment than ULTRA CLEAN. However, BP Prudhoe is 1.88 times more volatile than ULTRA CLEAN HLDGS. It trades about 0.01 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about -0.14 per unit of risk. If you would invest  61.00  in BP Prudhoe Bay on December 19, 2024 and sell it today you would lose (8.00) from holding BP Prudhoe Bay or give up 13.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

BP Prudhoe Bay  vs.  ULTRA CLEAN HLDGS

BP Prudhoe Bay

Risk-Adjusted Performance

Very Weak

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

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ULTRA CLEAN HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with BP Prudhoe and ULTRA CLEAN

The main advantage of trading using opposite BP Prudhoe and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Prudhoe 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 BP Prudhoe Bay 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..