Correlation Between Ultra Clean and Bannerman Resources

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

Diversification Opportunities for Ultra Clean and Bannerman Resources

0.38

Correlation Coefficient

Ultra Clean  Bannerman Resources

Weak diversification

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

Pair Corralation between Ultra Clean and Bannerman Resources

Assuming the 90 days horizon Ultra Clean Holdings is expected to generate 0.7 times more return on investment than Bannerman Resources. However, Ultra Clean Holdings is 1.42 times less risky than Bannerman Resources. It trades about 0.04 of its potential returns per unit of risk. Bannerman Resources Limited is currently generating about 0.01 per unit of risk. If you would invest  2,980  in Ultra Clean Holdings on October 14, 2024 and sell it today you would earn a total of  720.00  from holding Ultra Clean Holdings or generate 24.16% 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 Holdings  vs.  Bannerman Resources Limited

Ultra Clean Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ultra Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bannerman Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bannerman Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ultra Clean and Bannerman Resources

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

The idea behind Ultra Clean Holdings and Bannerman Resources Limited 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..