Correlation Between Universal Display and ScanSource

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

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

Diversification Opportunities for Universal Display and ScanSource

-0.75

Correlation Coefficient

Universal Display  ScanSource

Pay attention - limited upside

The 3 months correlation between Universal and ScanSource is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Universal Display i.e., Universal Display and ScanSource go up and down completely randomly.

Pair Corralation between Universal Display and ScanSource

Assuming the 90 days horizon Universal Display is expected to under-perform the ScanSource. In addition to that, Universal Display is 1.02 times more volatile than ScanSource. It trades about -0.08 of its total potential returns per unit of risk. ScanSource is currently generating about 0.11 per unit of volatility. If you would invest  4,580  in ScanSource on September 21, 2024 and sell it today you would earn a total of  220.00  from holding ScanSource or generate 4.8% return on investment over 90 days.

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

Universal Display  vs.  ScanSource

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. Despite unsteady 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.

ScanSource

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ScanSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Universal Display and ScanSource

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

The idea behind Universal Display and ScanSource 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.