Correlation Between Carnegie Clean and Universal Display

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

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

Diversification Opportunities for Carnegie Clean and Universal Display

-0.45

Correlation Coefficient

Carnegie Clean  Universal Display

Very good diversification

The 3 months correlation between Carnegie and Universal is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and Carnegie Clean 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 Carnegie Clean Energy 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 Carnegie Clean i.e., Carnegie Clean and Universal Display go up and down completely randomly.

Pair Corralation between Carnegie Clean and Universal Display

Assuming the 90 days trading horizon Carnegie Clean Energy is expected to generate 1.2 times more return on investment than Universal Display. However, Carnegie Clean is 1.2 times more volatile than Universal Display. It trades about -0.01 of its potential returns per unit of risk. Universal Display is currently generating about -0.28 per unit of risk. If you would invest  2.22  in Carnegie Clean Energy on September 23, 2024 and sell it today you would lose (0.02) from holding Carnegie Clean Energy or give up 0.9% of portfolio value over 90 days.

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

Carnegie Clean Energy  vs.  Universal Display

Carnegie Clean Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Carnegie Clean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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

Pair Trading with Carnegie Clean and Universal Display

The main advantage of trading using opposite Carnegie Clean and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean 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 Carnegie Clean Energy 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.