Correlation Between KOBE STEEL and ULTRA CLEAN

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

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

Diversification Opportunities for KOBE STEEL and ULTRA CLEAN

-0.2

Correlation Coefficient

KOBE STEEL  ULTRA CLEAN

Good diversification

The 3 months correlation between KOBE and ULTRA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding KOBE STEEL LTD 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 KOBE STEEL 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 KOBE STEEL LTD 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 KOBE STEEL i.e., KOBE STEEL and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between KOBE STEEL and ULTRA CLEAN

Assuming the 90 days trading horizon KOBE STEEL LTD is expected to under-perform the ULTRA CLEAN. But the stock apears to be less risky and, when comparing its historical volatility, KOBE STEEL LTD is 1.95 times less risky than ULTRA CLEAN. The stock trades about 0.0 of its potential returns per unit of risk. The ULTRA CLEAN HLDGS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,240  in ULTRA CLEAN HLDGS on October 23, 2024 and sell it today you would earn a total of  480.00  from holding ULTRA CLEAN HLDGS or generate 14.81% return on investment over 90 days.

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

KOBE STEEL LTD  vs.  ULTRA CLEAN HLDGS

KOBE STEEL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KOBE STEEL LTD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, KOBE STEEL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile 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 KOBE STEEL and ULTRA CLEAN

The main advantage of trading using opposite KOBE STEEL and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOBE STEEL 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 KOBE STEEL LTD 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.