Correlation Between Ultra Clean and Radcom

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

Diversification Opportunities for Ultra Clean and Radcom

0.29

Correlation Coefficient

Ultra Clean  Radcom

Modest diversification

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

Pair Corralation between Ultra Clean and Radcom

Given the investment horizon of 90 days Ultra Clean is expected to generate 1.16 times less return on investment than Radcom. In addition to that, Ultra Clean is 1.07 times more volatile than Radcom. It trades about 0.02 of its total potential returns per unit of risk. Radcom is currently generating about 0.03 per unit of volatility. If you would invest  988.00  in Radcom on September 14, 2024 and sell it today you would earn a total of  203.00  from holding Radcom or generate 20.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Ultra Clean Holdings  vs.  Radcom

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.

Radcom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and Radcom

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

The idea behind Ultra Clean Holdings and Radcom 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.