Correlation Between BOSTON BEER and Universal Display

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

By analyzing existing cross correlation between BOSTON BEER A and Universal Display, you can compare the effects of market volatilities on BOSTON BEER 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 BOSTON BEER with a short position of Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Universal Display.

Diversification Opportunities for BOSTON BEER and Universal Display

-0.81

Correlation Coefficient

BOSTON BEER  Universal Display

Pay attention - limited upside

The 3 months correlation between BOSTON and Universal is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and BOSTON BEER 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 BOSTON BEER A 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 BOSTON BEER i.e., BOSTON BEER and Universal Display go up and down completely randomly.

Pair Corralation between BOSTON BEER and Universal Display

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Universal Display. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.17 times less risky than Universal Display. The stock trades about -0.01 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  11,515  in Universal Display on October 10, 2024 and sell it today you would earn a total of  3,060  from holding Universal Display or generate 26.57% return on investment over 90 days.

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

BOSTON BEER A   vs.  Universal Display

BOSTON BEER A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, BOSTON BEER exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BOSTON BEER and Universal Display

The main advantage of trading using opposite BOSTON BEER and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER 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 BOSTON BEER A 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.