Correlation Between Ultra Clean and Carnegie Clean

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

Diversification Opportunities for Ultra Clean and Carnegie Clean

-0.34

Correlation Coefficient

Ultra Clean  Carnegie Clean

Very good diversification

The 3 months correlation between Ultra and Carnegie is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Carnegie Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnegie Clean Energy 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 Carnegie Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnegie Clean Energy has no effect on the direction of Ultra Clean i.e., Ultra Clean and Carnegie Clean go up and down completely randomly.

Pair Corralation between Ultra Clean and Carnegie Clean

Assuming the 90 days horizon Ultra Clean is expected to generate 1.28 times less return on investment than Carnegie Clean. But when comparing it to its historical volatility, Ultra Clean Holdings is 1.47 times less risky than Carnegie Clean. It trades about 0.07 of its potential returns per unit of risk. Carnegie Clean Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.02  in Carnegie Clean Energy on September 12, 2024 and sell it today you would earn a total of  0.08  from holding Carnegie Clean Energy or generate 3.96% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  Carnegie Clean Energy

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.

Carnegie Clean Energy

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Carnegie Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ultra Clean and Carnegie Clean

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

The idea behind Ultra Clean Holdings and Carnegie Clean Energy 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.