Correlation Between Universal Display and European Metals
Can any of the company-specific risk be diversified away by investing in both Universal Display and European Metals 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 European Metals 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 European Metals Holdings, you can compare the effects of market volatilities on Universal Display and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and European Metals.
Diversification Opportunities for Universal Display and European Metals
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and European is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display Corp and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Universal Display i.e., Universal Display and European Metals go up and down completely randomly.
Pair Corralation between Universal Display and European Metals
Assuming the 90 days trading horizon Universal Display Corp is expected to generate 0.74 times more return on investment than European Metals. However, Universal Display Corp is 1.36 times less risky than European Metals. It trades about 0.03 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.06 per unit of risk. If you would invest 12,839 in Universal Display Corp on October 15, 2024 and sell it today you would earn a total of 1,872 from holding Universal Display Corp or generate 14.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 84.54% |
| Values | Daily Returns |
Universal Display Corp vs. European Metals Holdings
Performance |
| Timeline |
| Universal Display Corp |
| European Metals Holdings |
Universal Display and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and European Metals
The main advantage of trading using opposite Universal Display and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.| Universal Display vs. Primorus Investments plc | Universal Display vs. Fevertree Drinks Plc | Universal Display vs. Seraphim Space Investment | Universal Display vs. BlackRock Frontiers Investment |
| European Metals vs. Premier Foods PLC | European Metals vs. Roebuck Food Group | European Metals vs. Symphony Environmental Technologies | European Metals vs. Associated British Foods |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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