Correlation Between Ultra Clean and HSBC Holdings

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

Diversification Opportunities for Ultra Clean and HSBC Holdings

-0.65

Correlation Coefficient

Ultra Clean  HSBC Holdings

Excellent diversification

The 3 months correlation between Ultra and HSBC is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and HSBC Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings plc 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 HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings plc has no effect on the direction of Ultra Clean i.e., Ultra Clean and HSBC Holdings go up and down completely randomly.

Pair Corralation between Ultra Clean and HSBC Holdings

Assuming the 90 days horizon Ultra Clean Holdings is expected to under-perform the HSBC Holdings. In addition to that, Ultra Clean is 2.61 times more volatile than HSBC Holdings plc. It trades about -0.11 of its total potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.2 per unit of volatility. If you would invest  887.00  in HSBC Holdings plc on December 20, 2024 and sell it today you would earn a total of  199.00  from holding HSBC Holdings plc or generate 22.44% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  HSBC Holdings plc

Ultra Clean Holdings

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

HSBC Holdings plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, HSBC Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and HSBC Holdings

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

The idea behind Ultra Clean Holdings and HSBC Holdings plc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.