Correlation Between Ultra Clean and LG Display

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

Diversification Opportunities for Ultra Clean and LG Display

UltraLGADiversified AwayUltraLGADiversified Away100%
-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Ultra and LGA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display 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 LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of Ultra Clean i.e., Ultra Clean and LG Display go up and down completely randomly.

Pair Corralation between Ultra Clean and LG Display

Assuming the 90 days horizon Ultra Clean Holdings is expected to generate 1.49 times more return on investment than LG Display. However, Ultra Clean is 1.49 times more volatile than LG Display Co. It trades about 0.07 of its potential returns per unit of risk. LG Display Co is currently generating about -0.04 per unit of risk. If you would invest  3,240  in Ultra Clean Holdings on November 19, 2024 and sell it today you would earn a total of  280.00  from holding Ultra Clean Holdings or generate 8.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ultra Clean Holdings  vs.  LG Display Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15UCE LGA
       Timeline  
Ultra Clean Holdings 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ultra Clean may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb32333435363738
LG Display 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days LG Display Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LG Display is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.9533.053.13.153.23.253.3

Ultra Clean and LG Display Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.09-6.06-4.03-2.0-0.03381.994.046.18.1510.21 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15UCE LGA
       Returns  

Pair Trading with Ultra Clean and LG Display

The main advantage of trading using opposite Ultra Clean and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.
The idea behind Ultra Clean Holdings and LG Display Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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