Correlation Between Universal Display and Metro AG
Can any of the company-specific risk be diversified away by investing in both Universal Display and Metro AG 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 Metro AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Display and Metro AG, you can compare the effects of market volatilities on Universal Display and Metro AG 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 Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and Metro AG.
Diversification Opportunities for Universal Display and Metro AG
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Universal and Metro is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Universal Display i.e., Universal Display and Metro AG go up and down completely randomly.
Pair Corralation between Universal Display and Metro AG
Assuming the 90 days horizon Universal Display is expected to generate 1.22 times more return on investment than Metro AG. However, Universal Display is 1.22 times more volatile than Metro AG. It trades about 0.04 of its potential returns per unit of risk. Metro AG is currently generating about -0.06 per unit of risk. If you would invest 10,230 in Universal Display on September 28, 2024 and sell it today you would earn a total of 4,240 from holding Universal Display or generate 41.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Display vs. Metro AG
Performance |
| Timeline |
| Universal Display |
| Metro AG |
Universal Display and Metro AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and Metro AG
The main advantage of trading using opposite Universal Display and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG's long position.| Universal Display vs. FLOW TRADERS LTD | Universal Display vs. RETAIL FOOD GROUP | Universal Display vs. TRADELINK ELECTRON | Universal Display vs. ORMAT TECHNOLOGIES |
| Metro AG vs. Universal Display | Metro AG vs. Jupiter Fund Management | Metro AG vs. CEOTRONICS | Metro AG vs. TRAVEL LEISURE DL 01 |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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