Correlation Between Universal Display and National Beverage
Can any of the company-specific risk be diversified away by investing in both Universal Display and National Beverage 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 Universal Display and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Display Corp and National Beverage Corp, you can compare the effects of market volatilities on Universal Display and National Beverage 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 Universal Display with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and National Beverage.
Diversification Opportunities for Universal Display and National Beverage
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Universal and National is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display Corp and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and Universal Display 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 Universal Display Corp are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Universal Display i.e., Universal Display and National Beverage go up and down completely randomly.
Pair Corralation between Universal Display and National Beverage
Assuming the 90 days trading horizon Universal Display is expected to generate 2.38 times less return on investment than National Beverage. In addition to that, Universal Display is 1.06 times more volatile than National Beverage Corp. It trades about 0.01 of its total potential returns per unit of risk. National Beverage Corp is currently generating about 0.01 per unit of volatility. If you would invest 4,341 in National Beverage Corp on October 12, 2024 and sell it today you would earn a total of 3.00 from holding National Beverage Corp or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.34% |
| Values | Daily Returns |
Universal Display Corp vs. National Beverage Corp
Performance |
| Timeline |
| Universal Display Corp |
| National Beverage Corp |
Universal Display and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and National Beverage
The main advantage of trading using opposite Universal Display and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Universal Display vs. Abingdon Health Plc | Universal Display vs. Omega Healthcare Investors | Universal Display vs. Darden Restaurants | Universal Display vs. Spire Healthcare Group |
| National Beverage vs. Future Metals NL | National Beverage vs. Power Metal Resources | National Beverage vs. Zegona Communications Plc | National Beverage vs. Westlake Chemical Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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