Correlation Between ULTRA CLEAN and TRADEGATE

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

Diversification Opportunities for ULTRA CLEAN and TRADEGATE

0.38

Correlation Coefficient

ULTRA CLEAN  TRADEGATE

Weak diversification

The 3 months correlation between ULTRA and TRADEGATE is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and TRADEGATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRADEGATE 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 TRADEGATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRADEGATE has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and TRADEGATE go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and TRADEGATE

Assuming the 90 days trading horizon ULTRA CLEAN HLDGS is expected to generate 8.46 times more return on investment than TRADEGATE. However, ULTRA CLEAN is 8.46 times more volatile than TRADEGATE. It trades about 0.03 of its potential returns per unit of risk. TRADEGATE is currently generating about -0.24 per unit of risk. If you would invest  3,600  in ULTRA CLEAN HLDGS on October 7, 2024 and sell it today you would earn a total of  20.00  from holding ULTRA CLEAN HLDGS or generate 0.56% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  TRADEGATE

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

TRADEGATE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRADEGATE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, TRADEGATE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ULTRA CLEAN and TRADEGATE

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

The idea behind ULTRA CLEAN HLDGS and TRADEGATE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.