Correlation Between UNIVERSAL DISPLAY and Siemens Aktiengesellscha

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

By analyzing existing cross correlation between UNIVERSAL DISPLAY and Siemens Aktiengesellschaft, you can compare the effects of market volatilities on UNIVERSAL DISPLAY and Siemens Aktiengesellscha 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 Siemens Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNIVERSAL DISPLAY and Siemens Aktiengesellscha.

Diversification Opportunities for UNIVERSAL DISPLAY and Siemens Aktiengesellscha

-0.37

Correlation Coefficient

UNIVERSAL DISPLAY  Siemens Aktiengesellscha

Very good diversification

The 3 months correlation between UNIVERSAL and Siemens is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL DISPLAY and Siemens Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Aktiengesellscha 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 Siemens Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Aktiengesellscha has no effect on the direction of UNIVERSAL DISPLAY i.e., UNIVERSAL DISPLAY and Siemens Aktiengesellscha go up and down completely randomly.

Pair Corralation between UNIVERSAL DISPLAY and Siemens Aktiengesellscha

Assuming the 90 days trading horizon UNIVERSAL DISPLAY is expected to under-perform the Siemens Aktiengesellscha. In addition to that, UNIVERSAL DISPLAY is 1.29 times more volatile than Siemens Aktiengesellschaft. It trades about -0.03 of its total potential returns per unit of risk. Siemens Aktiengesellschaft is currently generating about 0.25 per unit of volatility. If you would invest  18,520  in Siemens Aktiengesellschaft on December 22, 2024 and sell it today you would earn a total of  5,110  from holding Siemens Aktiengesellschaft or generate 27.59% return on investment over 90 days.

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

UNIVERSAL DISPLAY  vs.  Siemens Aktiengesellschaft

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. In spite of comparatively stable fundamental indicators, UNIVERSAL DISPLAY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Siemens Aktiengesellscha

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Aktiengesellschaft are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Siemens Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNIVERSAL DISPLAY and Siemens Aktiengesellscha

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

The idea behind UNIVERSAL DISPLAY and Siemens Aktiengesellschaft 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.