Correlation Between Universal Display and Daktronics

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

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

Diversification Opportunities for Universal Display and Daktronics

-0.69

Correlation Coefficient

Universal Display  Daktronics

Excellent diversification

The 3 months correlation between Universal and Daktronics is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Daktronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daktronics 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 Daktronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daktronics has no effect on the direction of Universal Display i.e., Universal Display and Daktronics go up and down completely randomly.

Pair Corralation between Universal Display and Daktronics

Given the investment horizon of 90 days Universal Display is expected to under-perform the Daktronics. But the stock apears to be less risky and, when comparing its historical volatility, Universal Display is 1.03 times less risky than Daktronics. The stock trades about -0.07 of its potential returns per unit of risk. The Daktronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,361  in Daktronics on August 31, 2024 and sell it today you would earn a total of  179.00  from holding Daktronics or generate 13.15% 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.  Daktronics

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. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Daktronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daktronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Daktronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Display and Daktronics

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

The idea behind Universal Display and Daktronics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.