Correlation Between ULTRA CLEAN and ServiceNow

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

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

Diversification Opportunities for ULTRA CLEAN and ServiceNow

0.49

Correlation Coefficient

ULTRA CLEAN  ServiceNow

Very weak diversification

The 3 months correlation between ULTRA and ServiceNow is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and ULTRA CLEAN 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 ULTRA CLEAN HLDGS are associated (or correlated) with ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and ServiceNow go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and ServiceNow

Assuming the 90 days trading horizon ULTRA CLEAN HLDGS is expected to under-perform the ServiceNow. In addition to that, ULTRA CLEAN is 2.06 times more volatile than ServiceNow. It trades about -0.12 of its total potential returns per unit of risk. ServiceNow is currently generating about -0.17 per unit of volatility. If you would invest  106,600  in ServiceNow on October 5, 2024 and sell it today you would lose (4,240) from holding ServiceNow or give up 3.98% of portfolio value over 90 days.

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

ULTRA CLEAN HLDGS  vs.  ServiceNow

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, ULTRA CLEAN is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ServiceNow

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days ServiceNow has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, ServiceNow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and ServiceNow

The main advantage of trading using opposite ULTRA CLEAN and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ULTRA CLEAN position performs unexpectedly, ServiceNow 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 ServiceNow will offset losses from the drop in ServiceNow's long position.

The idea behind ULTRA CLEAN HLDGS and ServiceNow 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.