Correlation Between Ultra Clean and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both Ultra Clean and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES, you can compare the effects of market volatilities on Ultra Clean and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and NORTHEAST UTILITIES.
Diversification Opportunities for Ultra Clean and NORTHEAST UTILITIES
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ultra and NORTHEAST is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of Ultra Clean i.e., Ultra Clean and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between Ultra Clean and NORTHEAST UTILITIES
Assuming the 90 days horizon Ultra Clean Holdings is expected to generate 2.89 times more return on investment than NORTHEAST UTILITIES. However, Ultra Clean is 2.89 times more volatile than NORTHEAST UTILITIES. It trades about 0.04 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about -0.04 per unit of risk. If you would invest 3,520 in Ultra Clean Holdings on August 29, 2024 and sell it today you would earn a total of 80.00 from holding Ultra Clean Holdings or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ultra Clean Holdings vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| Ultra Clean Holdings |
| NORTHEAST UTILITIES |
Ultra Clean and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Clean and NORTHEAST UTILITIES
The main advantage of trading using opposite Ultra Clean and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES's long position.| Ultra Clean vs. STMICROELECTRONICS | Ultra Clean vs. Renesas Electronics | Ultra Clean vs. Ryanair Holdings plc | Ultra Clean vs. Enter Air SA |
| NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Superior Plus Corp | NORTHEAST UTILITIES 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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