Correlation Between ULTRA CLEAN and F5 Networks

Can any of the company-specific risk be diversified away by investing in both ULTRA CLEAN and F5 Networks 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 F5 Networks 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 F5 Networks, you can compare the effects of market volatilities on ULTRA CLEAN and F5 Networks 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 F5 Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of ULTRA CLEAN and F5 Networks.

Diversification Opportunities for ULTRA CLEAN and F5 Networks

0.7

Correlation Coefficient

ULTRA CLEAN  F5 Networks

Poor diversification

The 3 months correlation between ULTRA and FFV is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and F5 Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F5 Networks 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 F5 Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F5 Networks has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and F5 Networks go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and F5 Networks

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 2.65 times less return on investment than F5 Networks. In addition to that, ULTRA CLEAN is 2.33 times more volatile than F5 Networks. It trades about 0.05 of its total potential returns per unit of risk. F5 Networks is currently generating about 0.33 per unit of volatility. If you would invest  24,510  in F5 Networks on October 26, 2024 and sell it today you would earn a total of  1,460  from holding F5 Networks or generate 5.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

ULTRA CLEAN HLDGS  vs.  F5 Networks

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 3 (%) 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.

F5 Networks

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in F5 Networks are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, F5 Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and F5 Networks

The main advantage of trading using opposite ULTRA CLEAN and F5 Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ULTRA CLEAN position performs unexpectedly, F5 Networks 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 F5 Networks will offset losses from the drop in F5 Networks' long position.

The idea behind ULTRA CLEAN HLDGS and F5 Networks 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.