Correlation Between Ultra Clean and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Ultra Clean and Summit Materials 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 Summit Materials 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 Summit Materials, you can compare the effects of market volatilities on Ultra Clean and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and Summit Materials.
Diversification Opportunities for Ultra Clean and Summit Materials
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ultra and Summit is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Ultra Clean i.e., Ultra Clean and Summit Materials go up and down completely randomly.
Pair Corralation between Ultra Clean and Summit Materials
Given the investment horizon of 90 days Ultra Clean Holdings is expected to under-perform the Summit Materials. In addition to that, Ultra Clean is 1.48 times more volatile than Summit Materials. It trades about -0.01 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.06 per unit of volatility. If you would invest 4,259 in Summit Materials on August 25, 2024 and sell it today you would earn a total of 907.00 from holding Summit Materials or generate 21.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Clean Holdings vs. Summit Materials
Performance |
| Timeline |
| Ultra Clean Holdings |
| Summit Materials |
Ultra Clean and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Clean and Summit Materials
The main advantage of trading using opposite Ultra Clean and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Ultra Clean vs. Amtech Systems | Ultra Clean vs. Veeco Instruments | Ultra Clean vs. Cohu Inc | Ultra Clean vs. Onto Innovation |
| Summit Materials vs. Holcim | Summit Materials vs. Lafargeholcim Ltd ADR | Summit Materials vs. Eagle Materials | Summit Materials vs. James Hardie Industries |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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