Correlation Between Universal Display and China Resources
Can any of the company-specific risk be diversified away by investing in both Universal Display and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Display and China Resources Beer, you can compare the effects of market volatilities on Universal Display and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and China Resources.
Diversification Opportunities for Universal Display and China Resources
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Universal and China is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Universal Display i.e., Universal Display and China Resources go up and down completely randomly.
Pair Corralation between Universal Display and China Resources
Assuming the 90 days horizon Universal Display is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, Universal Display is 1.29 times less risky than China Resources. The stock trades about -0.03 of its potential returns per unit of risk. The China Resources Beer is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 297.00 in China Resources Beer on September 15, 2024 and sell it today you would earn a total of 41.00 from holding China Resources Beer or generate 13.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Display vs. China Resources Beer
Performance |
| Timeline |
| Universal Display |
| China Resources Beer |
Universal Display and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and China Resources
The main advantage of trading using opposite Universal Display and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Universal Display vs. Applied Materials | Universal Display vs. Tokyo Electron Limited | Universal Display vs. Superior Plus Corp | Universal Display vs. SIVERS SEMICONDUCTORS AB |
| China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Superior Plus Corp | China Resources vs. SIVERS SEMICONDUCTORS AB | China Resources vs. NorAm Drilling AS |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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