Correlation Between FARM 51 and ULTRA CLEAN

Can any of the company-specific risk be diversified away by investing in both FARM 51 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 FARM 51 and ULTRA CLEAN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FARM 51 GROUP and ULTRA CLEAN HLDGS, you can compare the effects of market volatilities on FARM 51 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 FARM 51 with a short position of ULTRA CLEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM 51 and ULTRA CLEAN.

Diversification Opportunities for FARM 51 and ULTRA CLEAN

-0.21

Correlation Coefficient

FARM 51  ULTRA CLEAN

Very good diversification

The 3 months correlation between FARM and ULTRA is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding FARM 51 GROUP 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 FARM 51 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 FARM 51 GROUP 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 FARM 51 i.e., FARM 51 and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between FARM 51 and ULTRA CLEAN

Assuming the 90 days horizon FARM 51 GROUP is expected to under-perform the ULTRA CLEAN. In addition to that, FARM 51 is 1.18 times more volatile than ULTRA CLEAN HLDGS. It trades about -0.1 of its total potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about 0.16 per unit of volatility. If you would invest  3,520  in ULTRA CLEAN HLDGS on October 11, 2024 and sell it today you would earn a total of  220.00  from holding ULTRA CLEAN HLDGS or generate 6.25% return on investment over 90 days.

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

FARM 51 GROUP  vs.  ULTRA CLEAN HLDGS

FARM 51 GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FARM 51 GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic 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 HLDGS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, ULTRA CLEAN may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FARM 51 and ULTRA CLEAN

The main advantage of trading using opposite FARM 51 and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM 51 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 FARM 51 GROUP 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.