Correlation Between Ultra Clean and BANDAI NAMCO

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

Diversification Opportunities for Ultra Clean and BANDAI NAMCO

-0.33

Correlation Coefficient

Ultra Clean  BANDAI NAMCO

Very good diversification

The 3 months correlation between Ultra and BANDAI is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings 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 BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Ultra Clean i.e., Ultra Clean and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between Ultra Clean and BANDAI NAMCO

Assuming the 90 days horizon Ultra Clean Holdings is expected to under-perform the BANDAI NAMCO. In addition to that, Ultra Clean is 1.09 times more volatile than BANDAI NAMCO Holdings. It trades about -0.12 of its total potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.37 per unit of volatility. If you would invest  1,972  in BANDAI NAMCO Holdings on September 29, 2024 and sell it today you would earn a total of  313.00  from holding BANDAI NAMCO Holdings or generate 15.87% 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.  BANDAI NAMCO Holdings

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.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANDAI NAMCO Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BANDAI NAMCO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and BANDAI NAMCO

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

The idea behind Ultra Clean Holdings and BANDAI NAMCO 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.