Correlation Between Ultra Clean and Universal Electronics

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

Diversification Opportunities for Ultra Clean and Universal Electronics

0.31

Correlation Coefficient

Ultra Clean  Universal Electronics

Weak diversification

The 3 months correlation between Ultra and Universal is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Universal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Electronics 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 Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Electronics has no effect on the direction of Ultra Clean i.e., Ultra Clean and Universal Electronics go up and down completely randomly.

Pair Corralation between Ultra Clean and Universal Electronics

Assuming the 90 days horizon Ultra Clean is expected to generate 2.59 times less return on investment than Universal Electronics. But when comparing it to its historical volatility, Ultra Clean Holdings is 1.17 times less risky than Universal Electronics. It trades about 0.06 of its potential returns per unit of risk. Universal Electronics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  406.00  in Universal Electronics on April 25, 2025 and sell it today you would earn a total of  139.00  from holding Universal Electronics or generate 34.24% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  Universal Electronics

Ultra Clean Holdings

Risk-Adjusted Performance

Modest

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. Despite nearly fragile basic indicators, Ultra Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and Universal Electronics

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

The idea behind Ultra Clean Holdings and Universal Electronics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.