Correlation Between Universal Display and ECD Automotive

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

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

Diversification Opportunities for Universal Display and ECD Automotive

0.67

Correlation Coefficient

Universal Display  ECD Automotive

Poor diversification

The 3 months correlation between Universal and ECD is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design and Universal Display 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 Universal Display are associated (or correlated) with ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Universal Display i.e., Universal Display and ECD Automotive go up and down completely randomly.

Pair Corralation between Universal Display and ECD Automotive

Given the investment horizon of 90 days Universal Display is expected to generate 23.89 times less return on investment than ECD Automotive. But when comparing it to its historical volatility, Universal Display is 2.56 times less risky than ECD Automotive. It trades about 0.0 of its potential returns per unit of risk. ECD Automotive Design is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  96.00  in ECD Automotive Design on October 26, 2024 and sell it today you would earn a total of  0.49  from holding ECD Automotive Design or generate 0.51% return on investment over 90 days.

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

Universal Display  vs.  ECD Automotive Design

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ECD Automotive Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Universal Display and ECD Automotive

The main advantage of trading using opposite Universal Display and ECD Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, ECD Automotive 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 ECD Automotive will offset losses from the drop in ECD Automotive's long position.

The idea behind Universal Display and ECD Automotive Design 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.