Correlation Between Boston Beer and Ultra Clean

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

By analyzing existing cross correlation between Boston Beer and Ultra Clean Holdings, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Ultra Clean.

Diversification Opportunities for Boston Beer and Ultra Clean

-0.3

Correlation Coefficient

Boston Beer  Ultra Clean

Very good diversification

The 3 months correlation between Boston and Ultra is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings and Boston Beer 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 Boston Beer 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 Holdings has no effect on the direction of Boston Beer i.e., Boston Beer and Ultra Clean go up and down completely randomly.

Pair Corralation between Boston Beer and Ultra Clean

Considering the 90-day investment horizon Boston Beer is expected to generate 0.54 times more return on investment than Ultra Clean. However, Boston Beer is 1.87 times less risky than Ultra Clean. It trades about -0.21 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about -0.16 per unit of risk. If you would invest  30,000  in Boston Beer on February 2, 2024 and sell it today you would lose (2,102) from holding Boston Beer or give up 7.01% of portfolio value over 90 days.

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

Boston Beer  vs.  Ultra Clean Holdings

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ultra Clean Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ultra Clean is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Boston Beer and Ultra Clean

The main advantage of trading using opposite Boston Beer and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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 Boston Beer and Ultra Clean 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.