Correlation Between Ultra Clean and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both Ultra Clean and NIPPON STEEL 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 NIPPON STEEL 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 NIPPON STEEL SPADR, you can compare the effects of market volatilities on Ultra Clean and NIPPON STEEL 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 NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and NIPPON STEEL.
Diversification Opportunities for Ultra Clean and NIPPON STEEL
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultra and NIPPON is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR 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 NIPPON STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON STEEL SPADR has no effect on the direction of Ultra Clean i.e., Ultra Clean and NIPPON STEEL go up and down completely randomly.
Pair Corralation between Ultra Clean and NIPPON STEEL
Assuming the 90 days horizon Ultra Clean Holdings is expected to generate 2.16 times more return on investment than NIPPON STEEL. However, Ultra Clean is 2.16 times more volatile than NIPPON STEEL SPADR. It trades about 0.07 of its potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.01 per unit of risk. If you would invest 3,400 in Ultra Clean Holdings on September 12, 2024 and sell it today you would earn a total of 120.00 from holding Ultra Clean Holdings or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Clean Holdings vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| Ultra Clean Holdings |
| NIPPON STEEL SPADR |
Ultra Clean and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Clean and NIPPON STEEL
The main advantage of trading using opposite Ultra Clean and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean position performs unexpectedly, NIPPON STEEL 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 NIPPON STEEL will offset losses from the drop in NIPPON STEEL's long position.| Ultra Clean vs. Applied Materials | Ultra Clean vs. Tokyo Electron Limited | Ultra Clean vs. Superior Plus Corp | Ultra Clean vs. SIVERS SEMICONDUCTORS AB |
| NIPPON STEEL vs. ArcelorMittal | NIPPON STEEL vs. Reliance Steel Aluminum | NIPPON STEEL vs. Superior Plus Corp | NIPPON STEEL vs. SIVERS SEMICONDUCTORS AB |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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