Correlation Between Ultra Clean and Ambarella

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

Diversification Opportunities for Ultra Clean and Ambarella

0.24

Correlation Coefficient

Ultra Clean  Ambarella

Modest diversification

The 3 months correlation between Ultra and Ambarella is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Ambarella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambarella 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 Ambarella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambarella has no effect on the direction of Ultra Clean i.e., Ultra Clean and Ambarella go up and down completely randomly.

Pair Corralation between Ultra Clean and Ambarella

Given the investment horizon of 90 days Ultra Clean Holdings is expected to under-perform the Ambarella. In addition to that, Ultra Clean is 1.58 times more volatile than Ambarella. It trades about -0.12 of its total potential returns per unit of risk. Ambarella is currently generating about 0.03 per unit of volatility. If you would invest  7,155  in Ambarella on November 28, 2024 and sell it today you would earn a total of  208.00  from holding Ambarella or generate 2.91% 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.  Ambarella

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ambarella

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Ambarella is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultra Clean and Ambarella

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

The idea behind Ultra Clean Holdings and Ambarella 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.