Correlation Between Apple and UNIVERSAL DISPLAY

Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and UNIVERSAL DISPLAY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and UNIVERSAL DISPLAY, you can compare the effects of market volatilities on Apple 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 Apple with a short position of UNIVERSAL DISPLAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and UNIVERSAL DISPLAY.

Diversification Opportunities for Apple and UNIVERSAL DISPLAY

-0.64

Correlation Coefficient

Apple  UNIVERSAL DISPLAY

Excellent diversification

The 3 months correlation between Apple and UNIVERSAL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and UNIVERSAL DISPLAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL DISPLAY and Apple 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 Apple Inc 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 Apple i.e., Apple and UNIVERSAL DISPLAY go up and down completely randomly.

Pair Corralation between Apple and UNIVERSAL DISPLAY

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the UNIVERSAL DISPLAY. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.25 times less risky than UNIVERSAL DISPLAY. The stock trades about -0.51 of its potential returns per unit of risk. The UNIVERSAL DISPLAY is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  14,480  in UNIVERSAL DISPLAY on October 24, 2024 and sell it today you would lose (200.00) from holding UNIVERSAL DISPLAY or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  UNIVERSAL DISPLAY

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Apple is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

UNIVERSAL DISPLAY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNIVERSAL DISPLAY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Apple and UNIVERSAL DISPLAY

The main advantage of trading using opposite Apple and UNIVERSAL DISPLAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.

The idea behind Apple Inc and UNIVERSAL DISPLAY pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.