Correlation Between HE Equipment and Universal Display

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

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

Diversification Opportunities for HE Equipment and Universal Display

-0.51

Correlation Coefficient

HE Equipment  Universal Display

Excellent diversification

The 3 months correlation between HEES and Universal is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Universal Display go up and down completely randomly.

Pair Corralation between HE Equipment and Universal Display

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Universal Display. In addition to that, HE Equipment is 1.15 times more volatile than Universal Display. It trades about -0.41 of its total potential returns per unit of risk. Universal Display is currently generating about -0.19 per unit of volatility. If you would invest  16,076  in Universal Display on September 28, 2024 and sell it today you would lose (1,209) from holding Universal Display or give up 7.52% of portfolio value over 90 days.

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

HE Equipment Services  vs.  Universal Display

HE Equipment Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HE Equipment 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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with HE Equipment and Universal Display

The main advantage of trading using opposite HE Equipment and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.