Correlation Between China Aircraft and Ultra Clean

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

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

Diversification Opportunities for China Aircraft and Ultra Clean

0.56

Correlation Coefficient

China Aircraft  Ultra Clean

Very weak diversification

The 3 months correlation between China and Ultra is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing 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 China Aircraft 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 China Aircraft Leasing 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 China Aircraft i.e., China Aircraft and Ultra Clean go up and down completely randomly.

Pair Corralation between China Aircraft and Ultra Clean

Assuming the 90 days horizon China Aircraft Leasing is expected to generate 1.34 times more return on investment than Ultra Clean. However, China Aircraft is 1.34 times more volatile than Ultra Clean Holdings. It trades about 0.05 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about 0.04 per unit of risk. If you would invest  26.00  in China Aircraft Leasing on October 4, 2024 and sell it today you would earn a total of  14.00  from holding China Aircraft Leasing or generate 53.85% return on investment over 90 days.

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

China Aircraft Leasing  vs.  Ultra Clean Holdings

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Ultra Clean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Aircraft and Ultra Clean

The main advantage of trading using opposite China Aircraft and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft 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 China Aircraft Leasing 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.