Correlation Between Molson Coors and Universal Display

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

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

Diversification Opportunities for Molson Coors and Universal Display

-0.73

Correlation Coefficient

Molson Coors  Universal Display

Pay attention - limited upside

The 3 months correlation between Molson and Universal is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and Molson Coors 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 Molson Coors Beverage 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 Molson Coors i.e., Molson Coors and Universal Display go up and down completely randomly.

Pair Corralation between Molson Coors and Universal Display

Assuming the 90 days trading horizon Molson Coors is expected to generate 1.94 times less return on investment than Universal Display. But when comparing it to its historical volatility, Molson Coors Beverage is 1.62 times less risky than Universal Display. It trades about 0.03 of its potential returns per unit of risk. Universal Display is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,694  in Universal Display on September 3, 2024 and sell it today you would earn a total of  4,506  from holding Universal Display or generate 42.14% return on investment over 90 days.

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

Molson Coors Beverage  vs.  Universal Display

Molson Coors Beverage

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Molson Coors unveiled 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 nearly stable basic indicators, Universal Display is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Molson Coors and Universal Display

The main advantage of trading using opposite Molson Coors and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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 Molson Coors Beverage 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.