Correlation Between US Physical and ULTRA CLEAN

Can any of the company-specific risk be diversified away by investing in both US Physical and ULTRA CLEAN 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 US Physical and ULTRA CLEAN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Physical Therapy and ULTRA CLEAN HLDGS, you can compare the effects of market volatilities on US Physical and ULTRA CLEAN 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 US Physical with a short position of ULTRA CLEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Physical and ULTRA CLEAN.

Diversification Opportunities for US Physical and ULTRA CLEAN

0.8

Correlation Coefficient

US Physical  ULTRA CLEAN

Very poor diversification

The 3 months correlation between UPH and ULTRA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN HLDGS and US Physical 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 US Physical Therapy are associated (or correlated) with ULTRA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULTRA CLEAN HLDGS has no effect on the direction of US Physical i.e., US Physical and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between US Physical and ULTRA CLEAN

Assuming the 90 days horizon US Physical Therapy is expected to generate 0.43 times more return on investment than ULTRA CLEAN. However, US Physical Therapy is 2.3 times less risky than ULTRA CLEAN. It trades about -0.2 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about -0.13 per unit of risk. If you would invest  8,699  in US Physical Therapy on December 20, 2024 and sell it today you would lose (1,699) from holding US Physical Therapy or give up 19.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

US Physical Therapy  vs.  ULTRA CLEAN HLDGS

US Physical Therapy

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Physical Therapy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ULTRA CLEAN HLDGS 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with US Physical and ULTRA CLEAN

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

The idea behind US Physical Therapy and ULTRA CLEAN HLDGS 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .