Correlation Between Reinsurance Group and Universal Display

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Can any of the company-specific risk be diversified away by investing in both Reinsurance Group 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 Reinsurance Group and Universal Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reinsurance Group of and Universal Display, you can compare the effects of market volatilities on Reinsurance Group 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 Reinsurance Group with a short position of Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Universal Display.

Diversification Opportunities for Reinsurance Group and Universal Display

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Reinsurance and Universal is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and Reinsurance Group 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 Reinsurance Group of 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 Reinsurance Group i.e., Reinsurance Group and Universal Display go up and down completely randomly.

Pair Corralation between Reinsurance Group and Universal Display

Assuming the 90 days trading horizon Reinsurance Group is expected to generate 1.18 times less return on investment than Universal Display. But when comparing it to its historical volatility, Reinsurance Group of is 1.41 times less risky than Universal Display. It trades about 0.06 of its potential returns per unit of risk. Universal Display is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,577  in Universal Display on September 19, 2024 and sell it today you would earn a total of  5,818  from holding Universal Display or generate 60.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Reinsurance Group of  vs.  Universal Display

 Performance 
       Timeline  
Reinsurance Group 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reinsurance Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Universal Display 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Universal Display has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Reinsurance Group and Universal Display Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Reinsurance Group and Universal Display

The main advantage of trading using opposite Reinsurance Group and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group 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 Reinsurance Group of 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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