Correlation Between ULTRA CLEAN and Nestl SA

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

Diversification Opportunities for ULTRA CLEAN and Nestl SA

-0.87

Correlation Coefficient

ULTRA CLEAN  Nestl SA

Pay attention - limited upside

The 3 months correlation between ULTRA and Nestl is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA 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 Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and Nestl SA go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Nestl SA

Assuming the 90 days trading horizon ULTRA CLEAN HLDGS is expected to under-perform the Nestl SA. In addition to that, ULTRA CLEAN is 2.46 times more volatile than Nestl SA. It trades about -0.15 of its total potential returns per unit of risk. Nestl SA is currently generating about 0.19 per unit of volatility. If you would invest  7,920  in Nestl SA on December 26, 2024 and sell it today you would earn a total of  1,540  from holding Nestl SA or generate 19.44% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  Nestl SA

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nestl SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nestl SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nestl SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and Nestl SA

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

The idea behind ULTRA CLEAN HLDGS and Nestl SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.