Correlation Between ULTRA CLEAN and Longfor Group

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

Diversification Opportunities for ULTRA CLEAN and Longfor Group

0.65

Correlation Coefficient

ULTRA CLEAN  Longfor Group

Poor diversification

The 3 months correlation between ULTRA and Longfor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group 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 Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and Longfor Group go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Longfor Group

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 5.16 times less return on investment than Longfor Group. But when comparing it to its historical volatility, ULTRA CLEAN HLDGS is 2.43 times less risky than Longfor Group. It trades about 0.04 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Longfor Group Holdings on September 2, 2024 and sell it today you would earn a total of  35.00  from holding Longfor Group Holdings or generate 36.84% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  Longfor Group Holdings

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 uncertain technical and fundamental indicators, ULTRA CLEAN may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Longfor Group Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Longfor Group Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Longfor Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and Longfor Group

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

The idea behind ULTRA CLEAN HLDGS and Longfor Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.