Correlation Between Ultra Clean and HydroGraph Clean

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

Diversification Opportunities for Ultra Clean and HydroGraph Clean

-0.46

Correlation Coefficient

Ultra Clean  HydroGraph Clean

Very good diversification

The 3 months correlation between Ultra and HydroGraph is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and HydroGraph Clean Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HydroGraph Clean Power 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 HydroGraph Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HydroGraph Clean Power has no effect on the direction of Ultra Clean i.e., Ultra Clean and HydroGraph Clean go up and down completely randomly.

Pair Corralation between Ultra Clean and HydroGraph Clean

Given the investment horizon of 90 days Ultra Clean is expected to generate 3.45 times less return on investment than HydroGraph Clean. But when comparing it to its historical volatility, Ultra Clean Holdings is 4.11 times less risky than HydroGraph Clean. It trades about 0.05 of its potential returns per unit of risk. HydroGraph Clean Power is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11.00  in HydroGraph Clean Power on February 3, 2024 and sell it today you would lose (1.00) from holding HydroGraph Clean Power or give up 9.09% of portfolio value over 90 days.

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

Ultra Clean Holdings  vs.  HydroGraph Clean Power

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

HydroGraph Clean Power

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HydroGraph Clean Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, HydroGraph Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and HydroGraph Clean

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

The idea behind Ultra Clean Holdings and HydroGraph Clean Power 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.