Correlation Between Ultra Clean and LOCKHEED

Can any of the company-specific risk be diversified away by investing in both Ultra Clean and LOCKHEED 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 LOCKHEED 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 LOCKHEED MARTIN P, you can compare the effects of market volatilities on Ultra Clean and LOCKHEED 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 LOCKHEED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and LOCKHEED.

Diversification Opportunities for Ultra Clean and LOCKHEED

0.19

Correlation Coefficient

Ultra Clean  LOCKHEED

Average diversification

The 3 months correlation between Ultra and LOCKHEED is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and LOCKHEED MARTIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOCKHEED MARTIN P 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 LOCKHEED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOCKHEED MARTIN P has no effect on the direction of Ultra Clean i.e., Ultra Clean and LOCKHEED go up and down completely randomly.

Pair Corralation between Ultra Clean and LOCKHEED

Given the investment horizon of 90 days Ultra Clean Holdings is expected to generate 1.6 times more return on investment than LOCKHEED. However, Ultra Clean is 1.6 times more volatile than LOCKHEED MARTIN P. It trades about 0.18 of its potential returns per unit of risk. LOCKHEED MARTIN P is currently generating about -0.21 per unit of risk. If you would invest  3,397  in Ultra Clean Holdings on September 16, 2024 and sell it today you would earn a total of  334.00  from holding Ultra Clean Holdings or generate 9.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

Ultra Clean Holdings  vs.  LOCKHEED MARTIN P

Ultra Clean Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ultra Clean unveiled solid returns over the last few months and may actually be approaching a breakup point.

LOCKHEED MARTIN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOCKHEED MARTIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for LOCKHEED MARTIN P investors.

Pair Trading with Ultra Clean and LOCKHEED

The main advantage of trading using opposite Ultra Clean and LOCKHEED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean position performs unexpectedly, LOCKHEED 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 LOCKHEED will offset losses from the drop in LOCKHEED's long position.

The idea behind Ultra Clean Holdings and LOCKHEED MARTIN P 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.