Correlation Between Universal Display and OSI Systems

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

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

Diversification Opportunities for Universal Display and OSI Systems

-0.54

Correlation Coefficient

Universal Display  OSI Systems

Excellent diversification

The 3 months correlation between Universal and OSI is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and OSI Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSI Systems 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 OSI Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSI Systems has no effect on the direction of Universal Display i.e., Universal Display and OSI Systems go up and down completely randomly.

Pair Corralation between Universal Display and OSI Systems

Given the investment horizon of 90 days Universal Display is expected to under-perform the OSI Systems. In addition to that, Universal Display is 1.23 times more volatile than OSI Systems. It trades about -0.05 of its total potential returns per unit of risk. OSI Systems is currently generating about 0.19 per unit of volatility. If you would invest  14,173  in OSI Systems on September 1, 2024 and sell it today you would earn a total of  3,567  from holding OSI Systems or generate 25.17% return on investment over 90 days.

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

Universal Display  vs.  OSI Systems

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.

OSI Systems

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OSI Systems are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, OSI Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Display and OSI Systems

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

The idea behind Universal Display and OSI Systems 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.