Correlation Between Carsales and Ultra Clean
Can any of the company-specific risk be diversified away by investing in both Carsales and Ultra Clean 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 Carsales and Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and Ultra Clean Holdings, you can compare the effects of market volatilities on Carsales and Ultra Clean 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 Carsales with a short position of Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Ultra Clean.
Diversification Opportunities for Carsales and Ultra Clean
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Carsales and Ultra is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings and Carsales 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 Carsales are associated (or correlated) with Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of Carsales i.e., Carsales and Ultra Clean go up and down completely randomly.
Pair Corralation between Carsales and Ultra Clean
Assuming the 90 days trading horizon Carsales is expected to generate 0.51 times more return on investment than Ultra Clean. However, Carsales is 1.95 times less risky than Ultra Clean. It trades about 0.39 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about 0.14 per unit of risk. If you would invest 2,280 in Carsales on August 31, 2024 and sell it today you would earn a total of 280.00 from holding Carsales or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. Ultra Clean Holdings
Performance |
| Timeline |
| Carsales |
| Ultra Clean Holdings |
Carsales and Ultra Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Ultra Clean
The main advantage of trading using opposite Carsales and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Ultra Clean 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 Ultra Clean will offset losses from the drop in Ultra Clean's long position.The idea behind Carsales and Ultra Clean Holdings 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.| Ultra Clean vs. SAFETY MEDICAL PROD | Ultra Clean vs. PLAYTECH | Ultra Clean vs. ONWARD MEDICAL BV | Ultra Clean vs. Playa Hotels Resorts |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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