Correlation Between Universal Display and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Universal Display and Cairn Homes 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 Cairn Homes 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 Cairn Homes PLC, you can compare the effects of market volatilities on Universal Display and Cairn Homes 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 Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and Cairn Homes.
Diversification Opportunities for Universal Display and Cairn Homes
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Cairn is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display Corp and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Universal Display i.e., Universal Display and Cairn Homes go up and down completely randomly.
Pair Corralation between Universal Display and Cairn Homes
Assuming the 90 days trading horizon Universal Display Corp is expected to under-perform the Cairn Homes. In addition to that, Universal Display is 1.65 times more volatile than Cairn Homes PLC. It trades about -0.01 of its total potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.14 per unit of volatility. If you would invest 10,370 in Cairn Homes PLC on September 12, 2024 and sell it today you would earn a total of 7,870 from holding Cairn Homes PLC or generate 75.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.39% |
| Values | Daily Returns |
Universal Display Corp vs. Cairn Homes PLC
Performance |
| Timeline |
| Universal Display Corp |
| Cairn Homes PLC |
Universal Display and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and Cairn Homes
The main advantage of trading using opposite Universal Display and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, Cairn Homes 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| Universal Display vs. Hong Kong Land | Universal Display vs. Neometals | Universal Display vs. Coor Service Management | Universal Display vs. Fidelity Sustainable USD |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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