Correlation Between Ultra Clean and Indie Semiconductor

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

Diversification Opportunities for Ultra Clean and Indie Semiconductor

0.2

Correlation Coefficient

Ultra Clean  Indie Semiconductor

Modest diversification

The 3 months correlation between Ultra and Indie is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and indie Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on indie Semiconductor 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 Indie Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of indie Semiconductor has no effect on the direction of Ultra Clean i.e., Ultra Clean and Indie Semiconductor go up and down completely randomly.

Pair Corralation between Ultra Clean and Indie Semiconductor

Given the investment horizon of 90 days Ultra Clean is expected to generate 6.96 times less return on investment than Indie Semiconductor. But when comparing it to its historical volatility, Ultra Clean Holdings is 2.76 times less risky than Indie Semiconductor. It trades about 0.02 of its potential returns per unit of risk. indie Semiconductor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  358.00  in indie Semiconductor on September 21, 2024 and sell it today you would earn a total of  52.00  from holding indie Semiconductor or generate 14.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ultra Clean Holdings  vs.  indie Semiconductor

Ultra Clean Holdings

Risk-Adjusted Performance

1 of 100

Weak

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

indie Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in indie Semiconductor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Indie Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and Indie Semiconductor

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

The idea behind Ultra Clean Holdings and indie Semiconductor 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.