Correlation Between ULTRA CLEAN and National Bank

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

Diversification Opportunities for ULTRA CLEAN and National Bank

0.08

Correlation Coefficient

ULTRA CLEAN  National Bank

Significant diversification

The 3 months correlation between ULTRA and National is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and National Bank go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and National Bank

Assuming the 90 days trading horizon ULTRA CLEAN HLDGS is expected to under-perform the National Bank. In addition to that, ULTRA CLEAN is 1.45 times more volatile than National Bank Holdings. It trades about -0.07 of its total potential returns per unit of risk. National Bank Holdings is currently generating about 0.07 per unit of volatility. If you would invest  3,393  in National Bank Holdings on October 4, 2024 and sell it today you would earn a total of  647.00  from holding National Bank Holdings or generate 19.07% 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.  National Bank Holdings

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

National Bank Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ULTRA CLEAN and National Bank

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

The idea behind ULTRA CLEAN HLDGS and National Bank Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.