Correlation Between OPERA SOFTWARE and UNIVERSAL DISPLAY

Can any of the company-specific risk be diversified away by investing in both OPERA SOFTWARE 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 OPERA SOFTWARE and UNIVERSAL DISPLAY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OPERA SOFTWARE and UNIVERSAL DISPLAY, you can compare the effects of market volatilities on OPERA SOFTWARE 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 OPERA SOFTWARE with a short position of UNIVERSAL DISPLAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of OPERA SOFTWARE and UNIVERSAL DISPLAY.

Diversification Opportunities for OPERA SOFTWARE and UNIVERSAL DISPLAY

0.45

Correlation Coefficient

OPERA SOFTWARE  UNIVERSAL DISPLAY

Very weak diversification

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

Pair Corralation between OPERA SOFTWARE and UNIVERSAL DISPLAY

Assuming the 90 days trading horizon OPERA SOFTWARE is expected to under-perform the UNIVERSAL DISPLAY. But the stock apears to be less risky and, when comparing its historical volatility, OPERA SOFTWARE is 1.01 times less risky than UNIVERSAL DISPLAY. The stock trades about 0.0 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  11,574  in UNIVERSAL DISPLAY on October 11, 2024 and sell it today you would earn a total of  3,171  from holding UNIVERSAL DISPLAY or generate 27.4% return on investment over 90 days.

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

OPERA SOFTWARE  vs.  UNIVERSAL DISPLAY

OPERA SOFTWARE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OPERA SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, OPERA SOFTWARE 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 fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with OPERA SOFTWARE and UNIVERSAL DISPLAY

The main advantage of trading using opposite OPERA SOFTWARE and UNIVERSAL DISPLAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OPERA SOFTWARE 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 OPERA SOFTWARE 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.