Correlation Between Ultra Clean and National Grid
Can any of the company-specific risk be diversified away by investing in both Ultra Clean and National Grid 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 National Grid 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 National Grid plc, you can compare the effects of market volatilities on Ultra Clean and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and National Grid.
Diversification Opportunities for Ultra Clean and National Grid
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ultra and National is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and National Grid plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid plc 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid plc has no effect on the direction of Ultra Clean i.e., Ultra Clean and National Grid go up and down completely randomly.
Pair Corralation between Ultra Clean and National Grid
Assuming the 90 days horizon Ultra Clean Holdings is expected to generate 1.72 times more return on investment than National Grid. However, Ultra Clean is 1.72 times more volatile than National Grid plc. It trades about 0.02 of its potential returns per unit of risk. National Grid plc is currently generating about 0.03 per unit of risk. If you would invest 3,080 in Ultra Clean Holdings on September 13, 2024 and sell it today you would earn a total of 440.00 from holding Ultra Clean Holdings or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Clean Holdings vs. National Grid plc
Performance |
| Timeline |
| Ultra Clean Holdings |
| National Grid plc |
Ultra Clean and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Clean and National Grid
The main advantage of trading using opposite Ultra Clean and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.| Ultra Clean vs. Cardinal Health | Ultra Clean vs. Fevertree Drinks PLC | Ultra Clean vs. DiamondRock Hospitality | Ultra Clean vs. Tsingtao Brewery |
| National Grid vs. LION ONE METALS | National Grid vs. Clean Energy Fuels | National Grid vs. HK Electric Investments | National Grid vs. Ultra Clean Holdings |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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