Correlation Between ULTRA CLEAN and Rolls Royce

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

Diversification Opportunities for ULTRA CLEAN and Rolls Royce

0.01

Correlation Coefficient

ULTRA CLEAN  Rolls Royce

Significant diversification

The 3 months correlation between ULTRA and Rolls is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and Rolls Royce Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce 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 Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and Rolls Royce go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Rolls Royce

Assuming the 90 days trading horizon ULTRA CLEAN HLDGS is expected to generate 1.45 times more return on investment than Rolls Royce. However, ULTRA CLEAN is 1.45 times more volatile than Rolls Royce Holdings plc. It trades about 0.07 of its potential returns per unit of risk. Rolls Royce Holdings plc is currently generating about 0.0 per unit of risk. If you would invest  3,540  in ULTRA CLEAN HLDGS on October 6, 2024 and sell it today you would earn a total of  80.00  from holding ULTRA CLEAN HLDGS or generate 2.26% 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.  Rolls Royce Holdings plc

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ULTRA CLEAN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rolls Royce Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Rolls Royce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and Rolls Royce

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

The idea behind ULTRA CLEAN HLDGS and Rolls Royce Holdings plc 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..