Correlation Between Universal Display and Vitec Software
Can any of the company-specific risk be diversified away by investing in both Universal Display and Vitec Software 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 Vitec Software 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 Vitec Software Group, you can compare the effects of market volatilities on Universal Display and Vitec Software 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 Vitec Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and Vitec Software.
Diversification Opportunities for Universal Display and Vitec Software
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and Vitec is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display Corp and Vitec Software Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitec Software Group 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 Vitec Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitec Software Group has no effect on the direction of Universal Display i.e., Universal Display and Vitec Software go up and down completely randomly.
Pair Corralation between Universal Display and Vitec Software
Assuming the 90 days trading horizon Universal Display Corp is expected to generate 1.36 times more return on investment than Vitec Software. However, Universal Display is 1.36 times more volatile than Vitec Software Group. It trades about 0.01 of its potential returns per unit of risk. Vitec Software Group is currently generating about 0.0 per unit of risk. If you would invest 15,993 in Universal Display Corp on October 12, 2024 and sell it today you would lose (808.00) from holding Universal Display Corp or give up 5.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.81% |
| Values | Daily Returns |
Universal Display Corp vs. Vitec Software Group
Performance |
| Timeline |
| Universal Display Corp |
| Vitec Software Group |
Universal Display and Vitec Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and Vitec Software
The main advantage of trading using opposite Universal Display and Vitec Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, Vitec Software 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 Vitec Software will offset losses from the drop in Vitec Software'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 |
| Vitec Software vs. Walmart | Vitec Software vs. BYD Co | Vitec Software vs. Volkswagen AG | Vitec Software vs. Volkswagen AG Non Vtg |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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