Correlation Between Universal Display and AMG Advanced
Can any of the company-specific risk be diversified away by investing in both Universal Display and AMG Advanced 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 AMG Advanced 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 AMG Advanced Metallurgical, you can compare the effects of market volatilities on Universal Display and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and AMG Advanced.
Diversification Opportunities for Universal Display and AMG Advanced
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and AMG is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display Corp and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of Universal Display i.e., Universal Display and AMG Advanced go up and down completely randomly.
Pair Corralation between Universal Display and AMG Advanced
Assuming the 90 days trading horizon Universal Display Corp is expected to generate 1.15 times more return on investment than AMG Advanced. However, Universal Display is 1.15 times more volatile than AMG Advanced Metallurgical. It trades about 0.04 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about -0.06 per unit of risk. If you would invest 11,620 in Universal Display Corp on August 24, 2024 and sell it today you would earn a total of 4,890 from holding Universal Display Corp or generate 42.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.53% |
| Values | Daily Returns |
Universal Display Corp vs. AMG Advanced Metallurgical
Performance |
| Timeline |
| Universal Display Corp |
| AMG Advanced Metallu |
Universal Display and AMG Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and AMG Advanced
The main advantage of trading using opposite Universal Display and AMG Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, AMG Advanced 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 AMG Advanced will offset losses from the drop in AMG Advanced's long position.| Universal Display vs. Quadrise Plc | Universal Display vs. Intuitive Investments Group | Universal Display vs. European Metals Holdings | Universal Display vs. Athelney Trust plc |
| AMG Advanced vs. Quadrise Plc | AMG Advanced vs. Intuitive Investments Group | AMG Advanced vs. European Metals Holdings | AMG Advanced vs. Athelney Trust plc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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