Correlation Between Ultra Clean and Tsingtao Brewery

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

Diversification Opportunities for Ultra Clean and Tsingtao Brewery

0.23

Correlation Coefficient

Ultra Clean  Tsingtao Brewery

Modest diversification

The 3 months correlation between Ultra and Tsingtao is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Ultra Clean i.e., Ultra Clean and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Ultra Clean and Tsingtao Brewery

Assuming the 90 days horizon Ultra Clean Holdings is expected to generate 1.51 times more return on investment than Tsingtao Brewery. However, Ultra Clean is 1.51 times more volatile than Tsingtao Brewery. It trades about 0.03 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about -0.03 per unit of risk. If you would invest  3,520  in Ultra Clean Holdings on October 26, 2024 and sell it today you would earn a total of  80.00  from holding Ultra Clean Holdings or generate 2.27% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  Tsingtao Brewery

Ultra Clean Holdings

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ultra Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Tsingtao Brewery 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 Tsingtao Brewery

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

The idea behind Ultra Clean Holdings and Tsingtao Brewery 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.