Correlation Between Pets At and Universal Display

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

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

Diversification Opportunities for Pets At and Universal Display

-0.02

Correlation Coefficient

Pets At  Universal Display

Good diversification

The 3 months correlation between Pets and Universal is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Pets at Home and Universal Display Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display Corp and Pets At 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 Pets at Home 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 Corp has no effect on the direction of Pets At i.e., Pets At and Universal Display go up and down completely randomly.

Pair Corralation between Pets At and Universal Display

Assuming the 90 days trading horizon Pets at Home is expected to generate 0.81 times more return on investment than Universal Display. However, Pets at Home is 1.24 times less risky than Universal Display. It trades about 0.13 of its potential returns per unit of risk. Universal Display Corp is currently generating about 0.03 per unit of risk. If you would invest  21,100  in Pets at Home on December 24, 2024 and sell it today you would earn a total of  3,020  from holding Pets at Home or generate 14.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Pets at Home  vs.  Universal Display Corp

Pets at Home

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pets at Home are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pets At unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Display Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Display Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Universal Display is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pets At and Universal Display

The main advantage of trading using opposite Pets At and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pets At 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 Pets at Home and Universal Display Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.