Correlation Between Anglo American and Universal Display

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

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

Diversification Opportunities for Anglo American and Universal Display

-0.27

Correlation Coefficient

Anglo American  Universal Display

Very good diversification

The 3 months correlation between Anglo and Universal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC 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 Anglo American 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 Anglo American PLC 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 Anglo American i.e., Anglo American and Universal Display go up and down completely randomly.

Pair Corralation between Anglo American and Universal Display

Assuming the 90 days trading horizon Anglo American PLC is expected to generate 0.89 times more return on investment than Universal Display. However, Anglo American PLC is 1.12 times less risky than Universal Display. It trades about -0.05 of its potential returns per unit of risk. Universal Display Corp is currently generating about -0.29 per unit of risk. If you would invest  239,100  in Anglo American PLC on September 25, 2024 and sell it today you would lose (5,800) from holding Anglo American PLC or give up 2.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Anglo American PLC  vs.  Universal Display Corp

Anglo American PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Anglo American is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Universal Display Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Display Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Anglo American and Universal Display

The main advantage of trading using opposite Anglo American and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American 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 Anglo American PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.