Correlation Between Ultra Clean and Zoom Video

Can any of the company-specific risk be diversified away by investing in both Ultra Clean and Zoom Video 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 Zoom Video into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultra Clean Holdings and Zoom Video Communications, you can compare the effects of market volatilities on Ultra Clean and Zoom Video 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 Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and Zoom Video.

Diversification Opportunities for Ultra Clean and Zoom Video

-0.63

Correlation Coefficient

Ultra Clean  Zoom Video

Excellent diversification

The 3 months correlation between Ultra and Zoom is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications 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 Holdings are associated (or correlated) with Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of Ultra Clean i.e., Ultra Clean and Zoom Video go up and down completely randomly.

Pair Corralation between Ultra Clean and Zoom Video

Assuming the 90 days horizon Ultra Clean Holdings is expected to under-perform the Zoom Video. But the stock apears to be less risky and, when comparing its historical volatility, Ultra Clean Holdings is 1.02 times less risky than Zoom Video. The stock trades about -0.11 of its potential returns per unit of risk. The Zoom Video Communications is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,217  in Zoom Video Communications on September 23, 2024 and sell it today you would lose (38.00) from holding Zoom Video Communications or give up 0.46% of portfolio value over 90 days.

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

Ultra Clean Holdings  vs.  Zoom Video Communications

Ultra Clean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Clean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Zoom Video Communications

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and Zoom Video

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

The idea behind Ultra Clean Holdings and Zoom Video Communications 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.