Correlation Between Clean Energy and ULTRA CLEAN

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

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

Diversification Opportunities for Clean Energy and ULTRA CLEAN

0.22

Correlation Coefficient

Clean Energy  ULTRA CLEAN

Modest diversification

The 3 months correlation between Clean and ULTRA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels 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 Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between Clean Energy and ULTRA CLEAN

Assuming the 90 days horizon Clean Energy Fuels is expected to generate 1.24 times more return on investment than ULTRA CLEAN. However, Clean Energy is 1.24 times more volatile than ULTRA CLEAN HLDGS. It trades about -0.01 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about -0.07 per unit of risk. If you would invest  246.00  in Clean Energy Fuels on September 23, 2024 and sell it today you would lose (6.00) from holding Clean Energy Fuels or give up 2.44% of portfolio value over 90 days.

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

Clean Energy Fuels  vs.  ULTRA CLEAN HLDGS

Clean Energy Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Energy Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Clean Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ULTRA CLEAN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Energy and ULTRA CLEAN

The main advantage of trading using opposite Clean Energy and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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 Clean Energy Fuels 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.