Correlation Between Ultra Clean and Universal Insurance

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

Diversification Opportunities for Ultra Clean and Universal Insurance

-0.71

Correlation Coefficient

Ultra Clean  Universal Insurance

Pay attention - limited upside

The 3 months correlation between Ultra and Universal is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance 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 Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Ultra Clean i.e., Ultra Clean and Universal Insurance go up and down completely randomly.

Pair Corralation between Ultra Clean and Universal Insurance

Given the investment horizon of 90 days Ultra Clean Holdings is expected to under-perform the Universal Insurance. In addition to that, Ultra Clean is 2.53 times more volatile than Universal Insurance Holdings. It trades about -0.09 of its total potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.05 per unit of volatility. If you would invest  2,049  in Universal Insurance Holdings on December 20, 2024 and sell it today you would earn a total of  101.00  from holding Universal Insurance Holdings or generate 4.93% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  Universal Insurance Holdings

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Universal Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Universal Insurance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ultra Clean and Universal Insurance

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

The idea behind Ultra Clean Holdings and Universal Insurance Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.