Correlation Between Ultra Clean and MAGIC SOFTWARE

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

Diversification Opportunities for Ultra Clean and MAGIC SOFTWARE

0.08

Correlation Coefficient

Ultra Clean  MAGIC SOFTWARE

Significant diversification

The 3 months correlation between Ultra and MAGIC is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and MAGIC SOFTWARE ENTR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGIC SOFTWARE ENTR 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 MAGIC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGIC SOFTWARE ENTR has no effect on the direction of Ultra Clean i.e., Ultra Clean and MAGIC SOFTWARE go up and down completely randomly.

Pair Corralation between Ultra Clean and MAGIC SOFTWARE

Assuming the 90 days horizon Ultra Clean Holdings is expected to under-perform the MAGIC SOFTWARE. In addition to that, Ultra Clean is 2.04 times more volatile than MAGIC SOFTWARE ENTR. It trades about -0.11 of its total potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.09 per unit of volatility. If you would invest  1,120  in MAGIC SOFTWARE ENTR on December 22, 2024 and sell it today you would earn a total of  120.00  from holding MAGIC SOFTWARE ENTR or generate 10.71% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  MAGIC SOFTWARE ENTR

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 weak 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.

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MAGIC SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ultra Clean and MAGIC SOFTWARE

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

The idea behind Ultra Clean Holdings and MAGIC SOFTWARE ENTR 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.