Correlation Between Universal Display and Nippon Telegraph

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

By analyzing existing cross correlation between Universal Display and Nippon Telegraph and, you can compare the effects of market volatilities on Universal Display and Nippon Telegraph 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 Nippon Telegraph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and Nippon Telegraph.

Diversification Opportunities for Universal Display and Nippon Telegraph

0.4

Correlation Coefficient

Universal Display  Nippon Telegraph

Very weak diversification

The 3 months correlation between Universal and Nippon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Nippon Telegraph and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph 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 Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph has no effect on the direction of Universal Display i.e., Universal Display and Nippon Telegraph go up and down completely randomly.

Pair Corralation between Universal Display and Nippon Telegraph

Assuming the 90 days horizon Universal Display is expected to generate 2.27 times more return on investment than Nippon Telegraph. However, Universal Display is 2.27 times more volatile than Nippon Telegraph and. It trades about -0.01 of its potential returns per unit of risk. Nippon Telegraph and is currently generating about -0.08 per unit of risk. If you would invest  14,267  in Universal Display on December 30, 2024 and sell it today you would lose (422.00) from holding Universal Display or give up 2.96% of portfolio value over 90 days.

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

Universal Display  vs.  Nippon Telegraph and

Universal Display

Risk-Adjusted Performance

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nippon Telegraph

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nippon Telegraph and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nippon Telegraph is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Display and Nippon Telegraph

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

The idea behind Universal Display and Nippon Telegraph and 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.