Correlation Between Ultra Clean and Nova

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

Diversification Opportunities for Ultra Clean and Nova

0.54

Correlation Coefficient

Ultra Clean  Nova

Very weak diversification

The 3 months correlation between Ultra and Nova is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova 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 Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of Ultra Clean i.e., Ultra Clean and Nova go up and down completely randomly.

Pair Corralation between Ultra Clean and Nova

Given the investment horizon of 90 days Ultra Clean Holdings is expected to under-perform the Nova. But the stock apears to be less risky and, when comparing its historical volatility, Ultra Clean Holdings is 1.09 times less risky than Nova. The stock trades about -0.03 of its potential returns per unit of risk. The Nova is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  20,834  in Nova on September 30, 2024 and sell it today you would lose (829.00) from holding Nova or give up 3.98% 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.  Nova

Ultra Clean Holdings

Risk-Adjusted Performance

0 of 100

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 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.

Nova

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ultra Clean and Nova

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

The idea behind Ultra Clean Holdings and Nova 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.