Correlation Between ULTRA CLEAN and Elixinol Wellness

Can any of the company-specific risk be diversified away by investing in both ULTRA CLEAN and Elixinol Wellness 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 Elixinol Wellness 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 Elixinol Wellness Limited, you can compare the effects of market volatilities on ULTRA CLEAN and Elixinol Wellness 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 Elixinol Wellness. Check out your portfolio center. Please also check ongoing floating volatility patterns of ULTRA CLEAN and Elixinol Wellness.

Diversification Opportunities for ULTRA CLEAN and Elixinol Wellness

0.16

Correlation Coefficient

ULTRA CLEAN  Elixinol Wellness

Average diversification

The 3 months correlation between ULTRA and Elixinol is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and Elixinol Wellness Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elixinol Wellness 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 Elixinol Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elixinol Wellness has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and Elixinol Wellness go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Elixinol Wellness

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 148.67 times less return on investment than Elixinol Wellness. But when comparing it to its historical volatility, ULTRA CLEAN HLDGS is 39.41 times less risky than Elixinol Wellness. It trades about 0.07 of its potential returns per unit of risk. Elixinol Wellness Limited is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Elixinol Wellness Limited on October 6, 2024 and sell it today you would earn a total of  1.80  from holding Elixinol Wellness Limited or generate 450.0% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  Elixinol Wellness Limited

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

Elixinol Wellness

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elixinol Wellness Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Elixinol Wellness reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and Elixinol Wellness

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

The idea behind ULTRA CLEAN HLDGS and Elixinol Wellness Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..