Correlation Between Ultra Clean and EMCORE
Can any of the company-specific risk be diversified away by investing in both Ultra Clean and EMCORE 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 EMCORE 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 EMCORE, you can compare the effects of market volatilities on Ultra Clean and EMCORE 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 EMCORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and EMCORE.
Diversification Opportunities for Ultra Clean and EMCORE
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ultra and EMCORE is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE 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 EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Ultra Clean i.e., Ultra Clean and EMCORE go up and down completely randomly.
Pair Corralation between Ultra Clean and EMCORE
Given the investment horizon of 90 days Ultra Clean is expected to generate 3.76 times less return on investment than EMCORE. But when comparing it to its historical volatility, Ultra Clean Holdings is 2.2 times less risky than EMCORE. It trades about 0.15 of its potential returns per unit of risk. EMCORE is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 213.00 in EMCORE on August 28, 2024 and sell it today you would earn a total of 87.00 from holding EMCORE or generate 40.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Clean Holdings vs. EMCORE
Performance |
| Timeline |
| Ultra Clean Holdings |
| EMCORE |
Ultra Clean and EMCORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Clean and EMCORE
The main advantage of trading using opposite Ultra Clean and EMCORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean position performs unexpectedly, EMCORE 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 EMCORE will offset losses from the drop in EMCORE's long position.The idea behind Ultra Clean Holdings and EMCORE 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.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |