Correlation Between ULTRA CLEAN and Jazz Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both ULTRA CLEAN and Jazz Pharmaceuticals 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 Jazz Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ULTRA CLEAN HLDGS and Jazz Pharmaceuticals plc, you can compare the effects of market volatilities on ULTRA CLEAN and Jazz Pharmaceuticals 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 Jazz Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of ULTRA CLEAN and Jazz Pharmaceuticals.

Diversification Opportunities for ULTRA CLEAN and Jazz Pharmaceuticals

0.29

Correlation Coefficient

ULTRA CLEAN  Jazz Pharmaceuticals

Modest diversification

The 3 months correlation between ULTRA and Jazz is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS and Jazz Pharmaceuticals plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals plc 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 HLDGS are associated (or correlated) with Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals plc has no effect on the direction of ULTRA CLEAN i.e., ULTRA CLEAN and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Jazz Pharmaceuticals

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 4.21 times less return on investment than Jazz Pharmaceuticals. In addition to that, ULTRA CLEAN is 1.64 times more volatile than Jazz Pharmaceuticals plc. It trades about 0.02 of its total potential returns per unit of risk. Jazz Pharmaceuticals plc is currently generating about 0.17 per unit of volatility. If you would invest  9,638  in Jazz Pharmaceuticals plc on September 25, 2024 and sell it today you would earn a total of  2,247  from holding Jazz Pharmaceuticals plc or generate 23.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

ULTRA CLEAN HLDGS  vs.  Jazz Pharmaceuticals plc

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ULTRA CLEAN is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Jazz Pharmaceuticals plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jazz Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ULTRA CLEAN and Jazz Pharmaceuticals

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

The idea behind ULTRA CLEAN HLDGS and Jazz Pharmaceuticals plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.