Correlation Between British American and Universal Display
Can any of the company-specific risk be diversified away by investing in both British American and Universal Display 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 British American and Universal Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Universal Display, you can compare the effects of market volatilities on British American and Universal Display 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 British American with a short position of Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Universal Display.
Diversification Opportunities for British American and Universal Display
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between British and Universal is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and British American 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 British American Tobacco are associated (or correlated) with Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of British American i.e., British American and Universal Display go up and down completely randomly.
Pair Corralation between British American and Universal Display
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.23 times more return on investment than Universal Display. However, British American Tobacco is 4.38 times less risky than Universal Display. It trades about 0.73 of its potential returns per unit of risk. Universal Display is currently generating about -0.33 per unit of risk. If you would invest 3,181 in British American Tobacco on August 31, 2024 and sell it today you would earn a total of 392.00 from holding British American Tobacco or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Universal Display
Performance |
| Timeline |
| British American Tobacco |
| Universal Display |
British American and Universal Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Universal Display
The main advantage of trading using opposite British American and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Universal Display 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 Universal Display will offset losses from the drop in Universal Display's long position.| British American vs. British American Tobacco | British American vs. Japan Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 |
| Universal Display vs. ASML Holding NV | Universal Display vs. Superior Plus Corp | Universal Display vs. NMI Holdings | Universal Display vs. Origin Agritech |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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