Correlation Between Ultra Clean and BOSTON BEER

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

Diversification Opportunities for Ultra Clean and BOSTON BEER

-0.84

Correlation Coefficient

Ultra Clean  BOSTON BEER

Pay attention - limited upside

The 3 months correlation between Ultra and BOSTON is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and BOSTON BEER A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOSTON BEER A 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 BOSTON BEER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOSTON BEER A has no effect on the direction of Ultra Clean i.e., Ultra Clean and BOSTON BEER go up and down completely randomly.

Pair Corralation between Ultra Clean and BOSTON BEER

Assuming the 90 days horizon Ultra Clean Holdings is expected to under-perform the BOSTON BEER. In addition to that, Ultra Clean is 2.43 times more volatile than BOSTON BEER A . It trades about -0.1 of its total potential returns per unit of risk. BOSTON BEER A is currently generating about 0.16 per unit of volatility. If you would invest  25,160  in BOSTON BEER A on September 4, 2024 and sell it today you would earn a total of  4,660  from holding BOSTON BEER A or generate 18.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Ultra Clean Holdings  vs.  BOSTON BEER A

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.

BOSTON BEER A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, BOSTON BEER exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and BOSTON BEER

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

The idea behind Ultra Clean Holdings and BOSTON BEER A 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .