Correlation Between Ultra Clean and TEXAS ROADHOUSE

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

Diversification Opportunities for Ultra Clean and TEXAS ROADHOUSE

0.55

Correlation Coefficient

Ultra Clean  TEXAS ROADHOUSE

Very weak diversification

The 3 months correlation between Ultra and TEXAS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and TEXAS ROADHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEXAS ROADHOUSE 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 TEXAS ROADHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TEXAS ROADHOUSE has no effect on the direction of Ultra Clean i.e., Ultra Clean and TEXAS ROADHOUSE go up and down completely randomly.

Pair Corralation between Ultra Clean and TEXAS ROADHOUSE

Assuming the 90 days horizon Ultra Clean Holdings is expected to under-perform the TEXAS ROADHOUSE. In addition to that, Ultra Clean is 2.63 times more volatile than TEXAS ROADHOUSE. It trades about -0.12 of its total potential returns per unit of risk. TEXAS ROADHOUSE is currently generating about -0.05 per unit of volatility. If you would invest  17,360  in TEXAS ROADHOUSE on December 26, 2024 and sell it today you would lose (1,095) from holding TEXAS ROADHOUSE or give up 6.31% of portfolio value over 90 days.

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

Ultra Clean Holdings  vs.  TEXAS ROADHOUSE

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.

TEXAS ROADHOUSE

Risk-Adjusted Performance

Very Weak

Over the last 90 days TEXAS ROADHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TEXAS ROADHOUSE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ultra Clean and TEXAS ROADHOUSE

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

The idea behind Ultra Clean Holdings and TEXAS ROADHOUSE 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.