Correlation Between Nufarm and Ultra Clean
Can any of the company-specific risk be diversified away by investing in both Nufarm 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 Nufarm and Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and Ultra Clean Holdings, you can compare the effects of market volatilities on Nufarm 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 Nufarm with a short position of Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Ultra Clean.
Diversification Opportunities for Nufarm and Ultra Clean
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nufarm and Ultra is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited 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 Nufarm 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 Nufarm Limited 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 Nufarm i.e., Nufarm and Ultra Clean go up and down completely randomly.
Pair Corralation between Nufarm and Ultra Clean
Assuming the 90 days horizon Nufarm Limited is expected to under-perform the Ultra Clean. But the stock apears to be less risky and, when comparing its historical volatility, Nufarm Limited is 1.61 times less risky than Ultra Clean. The stock trades about -0.04 of its potential returns per unit of risk. The Ultra Clean Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,915 in Ultra Clean Holdings on September 3, 2024 and sell it today you would earn a total of 585.00 from holding Ultra Clean Holdings or generate 20.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. Ultra Clean Holdings
Performance |
| Timeline |
| Nufarm Limited |
| Ultra Clean Holdings |
Nufarm and Ultra Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and Ultra Clean
The main advantage of trading using opposite Nufarm and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm 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 Nufarm Limited 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.| Ultra Clean vs. ASML HOLDING NY | Ultra Clean vs. ASML Holding NV | Ultra Clean vs. ASML Holding NV | Ultra Clean vs. Lam Research |
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 Stocks Directory module to find actively traded stocks across global markets.
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