Correlation Between ULTRA CLEAN and LG Electronics

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

Diversification Opportunities for ULTRA CLEAN and LG Electronics

-0.29

Correlation Coefficient

ULTRA CLEAN  LG Electronics

Very good diversification

The 3 months correlation between ULTRA and LGLG is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and LG Electronics go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and LG Electronics

Assuming the 90 days trading horizon ULTRA CLEAN HLDGS is expected to generate 0.81 times more return on investment than LG Electronics. However, ULTRA CLEAN HLDGS is 1.24 times less risky than LG Electronics. It trades about 0.09 of its potential returns per unit of risk. LG Electronics is currently generating about -0.08 per unit of risk. If you would invest  3,440  in ULTRA CLEAN HLDGS on October 10, 2024 and sell it today you would earn a total of  300.00  from holding ULTRA CLEAN HLDGS or generate 8.72% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  LG Electronics

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 4 (%) 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.

LG Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ULTRA CLEAN and LG Electronics

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

The idea behind ULTRA CLEAN HLDGS and LG Electronics 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.