Correlation Between NISSAN CHEMICAL and Ultra Clean

Can any of the company-specific risk be diversified away by investing in both NISSAN CHEMICAL 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 NISSAN CHEMICAL and Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NISSAN CHEMICAL IND and Ultra Clean Holdings, you can compare the effects of market volatilities on NISSAN CHEMICAL 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 NISSAN CHEMICAL with a short position of Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of NISSAN CHEMICAL and Ultra Clean.

Diversification Opportunities for NISSAN CHEMICAL and Ultra Clean

-0.17

Correlation Coefficient

NISSAN CHEMICAL  Ultra Clean

Good diversification

The 3 months correlation between NISSAN and Ultra is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding NISSAN CHEMICAL IND 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 NISSAN CHEMICAL 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 NISSAN CHEMICAL IND 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 NISSAN CHEMICAL i.e., NISSAN CHEMICAL and Ultra Clean go up and down completely randomly.

Pair Corralation between NISSAN CHEMICAL and Ultra Clean

Assuming the 90 days trading horizon NISSAN CHEMICAL IND is expected to under-perform the Ultra Clean. But the stock apears to be less risky and, when comparing its historical volatility, NISSAN CHEMICAL IND is 2.26 times less risky than Ultra Clean. The stock trades about -0.12 of its potential returns per unit of risk. The Ultra Clean Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,400  in Ultra Clean Holdings on September 13, 2024 and sell it today you would earn a total of  120.00  from holding Ultra Clean Holdings or generate 3.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NISSAN CHEMICAL IND  vs.  Ultra Clean Holdings

NISSAN CHEMICAL IND

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NISSAN CHEMICAL IND are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, NISSAN CHEMICAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ultra Clean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Clean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NISSAN CHEMICAL and Ultra Clean

The main advantage of trading using opposite NISSAN CHEMICAL and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NISSAN CHEMICAL 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 NISSAN CHEMICAL IND 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.