Correlation Between Bank of America and Ultra Clean
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Ultra Clean Holdings, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Ultra Clean.
Diversification Opportunities for Bank of America and Ultra Clean
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Ultra is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Bank of America 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 Verizon Communications 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 Bank of America i.e., Bank of America and Ultra Clean go up and down completely randomly.
Pair Corralation between Bank of America and Ultra Clean
Assuming the 90 days trading horizon Bank of America is expected to generate 1.61 times less return on investment than Ultra Clean. But when comparing it to its historical volatility, Verizon Communications is 2.19 times less risky than Ultra Clean. It trades about 0.26 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,160 in Ultra Clean Holdings on September 1, 2024 and sell it today you would earn a total of 340.00 from holding Ultra Clean Holdings or generate 10.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Ultra Clean Holdings
Performance |
| Timeline |
| Verizon Communications |
| Ultra Clean Holdings |
Bank of America and Ultra Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Ultra Clean
The main advantage of trading using opposite Bank of America and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Regions Financial | Bank of America vs. Shin Etsu Chemical Co | Bank of America vs. Sumitomo Chemical | Bank of America vs. CHEMICAL INDUSTRIES |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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