Correlation Between ULTRA CLEAN and Microsoft

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

Diversification Opportunities for ULTRA CLEAN and Microsoft

0.33

Correlation Coefficient

ULTRA CLEAN  Microsoft

Weak diversification

The 3 months correlation between ULTRA and Microsoft is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and Microsoft go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Microsoft

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 1.8 times less return on investment than Microsoft. In addition to that, ULTRA CLEAN is 1.97 times more volatile than Microsoft. It trades about 0.03 of its total potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of volatility. If you would invest  23,272  in Microsoft on September 17, 2024 and sell it today you would earn a total of  19,513  from holding Microsoft or generate 83.85% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  Microsoft

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ULTRA CLEAN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ULTRA CLEAN and Microsoft

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

The idea behind ULTRA CLEAN HLDGS and Microsoft 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.