Correlation Between Ultra Clean and Designer Brands

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

Diversification Opportunities for Ultra Clean and Designer Brands

0.47

Correlation Coefficient

Ultra Clean  Designer Brands

Very weak diversification

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

Pair Corralation between Ultra Clean and Designer Brands

Given the investment horizon of 90 days Ultra Clean Holdings is expected to generate 0.54 times more return on investment than Designer Brands. However, Ultra Clean Holdings is 1.84 times less risky than Designer Brands. It trades about 0.09 of its potential returns per unit of risk. Designer Brands is currently generating about -0.05 per unit of risk. If you would invest  3,779  in Ultra Clean Holdings on October 9, 2024 and sell it today you would earn a total of  122.00  from holding Ultra Clean Holdings or generate 3.23% 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.  Designer Brands

Ultra Clean Holdings

Risk-Adjusted Performance

1 of 100

Very Weak

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

Designer Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Designer Brands is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ultra Clean and Designer Brands

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

The idea behind Ultra Clean Holdings and Designer Brands 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.