Correlation Between Ultra Clean and Telefonaktiebolaget

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

Diversification Opportunities for Ultra Clean and Telefonaktiebolaget

0.0

Correlation Coefficient

Ultra Clean  Telefonaktiebolaget

Pay attention - limited upside

The 3 months correlation between Ultra and Telefonaktiebolaget is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Ultra Clean i.e., Ultra Clean and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Ultra Clean and Telefonaktiebolaget

Given the investment horizon of 90 days Ultra Clean Holdings is expected to under-perform the Telefonaktiebolaget. In addition to that, Ultra Clean is 1.43 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.2 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about -0.04 per unit of volatility. If you would invest  522.00  in Telefonaktiebolaget LM Ericsson on February 2, 2024 and sell it today you would lose (12.00) from holding Telefonaktiebolaget LM Ericsson or give up 2.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Ultra Clean Holdings  vs.  Telefonaktiebolaget LM Ericsso

Ultra Clean Holdings

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Ultra Clean is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Telefonaktiebolaget

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonaktiebolaget LM Ericsson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Telefonaktiebolaget 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 Telefonaktiebolaget

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

The idea behind Ultra Clean Holdings and Telefonaktiebolaget LM Ericsson 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.