Correlation Between Ultra Clean and OFX Group

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

Diversification Opportunities for Ultra Clean and OFX Group

-0.09

Correlation Coefficient

Ultra Clean  OFX Group

Good diversification

The 3 months correlation between Ultra and OFX is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and OFX Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFX Group 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 OFX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFX Group has no effect on the direction of Ultra Clean i.e., Ultra Clean and OFX Group go up and down completely randomly.

Pair Corralation between Ultra Clean and OFX Group

Given the investment horizon of 90 days Ultra Clean is expected to generate 1.97 times less return on investment than OFX Group. But when comparing it to its historical volatility, Ultra Clean Holdings is 2.89 times less risky than OFX Group. It trades about 0.06 of its potential returns per unit of risk. OFX Group Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  440.00  in OFX Group Ltd on September 12, 2024 and sell it today you would lose (5.00) from holding OFX Group Ltd or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ultra Clean Holdings  vs.  OFX Group Ltd

Ultra Clean Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ultra Clean unveiled solid returns over the last few months and may actually be approaching a breakup point.

OFX Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OFX Group Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, OFX Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and OFX Group

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

The idea behind Ultra Clean Holdings and OFX Group Ltd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.