Correlation Between ULTRA CLEAN and Sunny Optical

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

Diversification Opportunities for ULTRA CLEAN and Sunny Optical

0.69

Correlation Coefficient

ULTRA CLEAN  Sunny Optical

Poor diversification

The 3 months correlation between ULTRA and Sunny is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and Sunny Optical go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Sunny Optical

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 1.62 times less return on investment than Sunny Optical. In addition to that, ULTRA CLEAN is 1.14 times more volatile than Sunny Optical Technology. It trades about 0.17 of its total potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.32 per unit of volatility. If you would invest  680.00  in Sunny Optical Technology on September 20, 2024 and sell it today you would earn a total of  130.00  from holding Sunny Optical Technology or generate 19.12% 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.  Sunny Optical Technology

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 8 (%) 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.

Sunny Optical Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and Sunny Optical

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

The idea behind ULTRA CLEAN HLDGS and Sunny Optical Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.