Correlation Between Ultra Clean and HEMISPHERE EGY

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

Diversification Opportunities for Ultra Clean and HEMISPHERE EGY

0.47

Correlation Coefficient

Ultra Clean  HEMISPHERE EGY

Very weak diversification

The 3 months correlation between Ultra and HEMISPHERE is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and HEMISPHERE EGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEMISPHERE EGY 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 HEMISPHERE EGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEMISPHERE EGY has no effect on the direction of Ultra Clean i.e., Ultra Clean and HEMISPHERE EGY go up and down completely randomly.

Pair Corralation between Ultra Clean and HEMISPHERE EGY

Assuming the 90 days horizon Ultra Clean is expected to generate 1.44 times less return on investment than HEMISPHERE EGY. In addition to that, Ultra Clean is 2.16 times more volatile than HEMISPHERE EGY. It trades about 0.03 of its total potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.09 per unit of volatility. If you would invest  71.00  in HEMISPHERE EGY on October 23, 2024 and sell it today you would earn a total of  53.00  from holding HEMISPHERE EGY or generate 74.65% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  HEMISPHERE EGY

Ultra Clean Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ultra Clean reported solid returns over the last few months and may actually be approaching a breakup point.

HEMISPHERE EGY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HEMISPHERE EGY is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ultra Clean and HEMISPHERE EGY

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

The idea behind Ultra Clean Holdings and HEMISPHERE EGY 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.