Correlation Between Universal Display and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Universal Display and Arrow Electronics 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 Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Display and Arrow Electronics, you can compare the effects of market volatilities on Universal Display and Arrow Electronics 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 Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and Arrow Electronics.
Diversification Opportunities for Universal Display and Arrow Electronics
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Arrow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 are associated (or correlated) with Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Universal Display i.e., Universal Display and Arrow Electronics go up and down completely randomly.
Pair Corralation between Universal Display and Arrow Electronics
Assuming the 90 days horizon Universal Display is expected to under-perform the Arrow Electronics. In addition to that, Universal Display is 1.18 times more volatile than Arrow Electronics. It trades about -0.03 of its total potential returns per unit of risk. Arrow Electronics is currently generating about -0.01 per unit of volatility. If you would invest 11,600 in Arrow Electronics on September 3, 2024 and sell it today you would lose (300.00) from holding Arrow Electronics or give up 2.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Display vs. Arrow Electronics
Performance |
| Timeline |
| Universal Display |
| Arrow Electronics |
Universal Display and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and Arrow Electronics
The main advantage of trading using opposite Universal Display and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.| Universal Display vs. ASML HOLDING NY | Universal Display vs. ASML Holding NV | Universal Display vs. ASML Holding NV | Universal Display vs. Applied Materials |
| Arrow Electronics vs. DICKER DATA LTD | Arrow Electronics vs. KAGA EL LTD | Arrow Electronics vs. Wayside Technology Group | Arrow Electronics vs. INNELEC MULTIMMINHEO153 |
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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