Correlation Between Microsoft and UNIVERSAL DISPLAY
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and UNIVERSAL DISPLAY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and UNIVERSAL DISPLAY, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of UNIVERSAL DISPLAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and UNIVERSAL DISPLAY.
Diversification Opportunities for Microsoft and UNIVERSAL DISPLAY
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and UNIVERSAL is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UNIVERSAL DISPLAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL DISPLAY and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and UNIVERSAL DISPLAY go up and down completely randomly.
Pair Corralation between Microsoft and UNIVERSAL DISPLAY
Assuming the 90 days trading horizon Microsoft is expected to under-perform the UNIVERSAL DISPLAY. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.09 times less risky than UNIVERSAL DISPLAY. The stock trades about -0.2 of its potential returns per unit of risk. The UNIVERSAL DISPLAY is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 15,046 in UNIVERSAL DISPLAY on October 12, 2024 and sell it today you would lose (401.00) from holding UNIVERSAL DISPLAY or give up 2.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. UNIVERSAL DISPLAY
Performance |
| Timeline |
| Microsoft |
| UNIVERSAL DISPLAY |
Microsoft and UNIVERSAL DISPLAY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and UNIVERSAL DISPLAY
The main advantage of trading using opposite Microsoft and UNIVERSAL DISPLAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. DELTA AIR LINES | Microsoft vs. Wizz Air Holdings | Microsoft vs. Ryanair Holdings plc | Microsoft vs. Fair Isaac Corp |
| UNIVERSAL DISPLAY vs. HK Electric Investments | UNIVERSAL DISPLAY vs. Gruppo Mutuionline SpA | UNIVERSAL DISPLAY vs. YATRA ONLINE DL 0001 | UNIVERSAL DISPLAY vs. MUTUIONLINE |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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