Correlation Between Universal Display and TE Connectivity

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

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

Diversification Opportunities for Universal Display and TE Connectivity

-0.43

Correlation Coefficient

Universal Display  TE Connectivity

Very good diversification

The 3 months correlation between Universal and TEL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and TE Connectivity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TE Connectivity 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 TE Connectivity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TE Connectivity has no effect on the direction of Universal Display i.e., Universal Display and TE Connectivity go up and down completely randomly.

Pair Corralation between Universal Display and TE Connectivity

Given the investment horizon of 90 days Universal Display is expected to under-perform the TE Connectivity. In addition to that, Universal Display is 1.99 times more volatile than TE Connectivity. It trades about -0.26 of its total potential returns per unit of risk. TE Connectivity is currently generating about -0.29 per unit of volatility. If you would invest  15,273  in TE Connectivity on September 25, 2024 and sell it today you would lose (906.00) from holding TE Connectivity or give up 5.93% of portfolio value over 90 days.

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

Universal Display  vs.  TE Connectivity

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

TE Connectivity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TE Connectivity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, TE Connectivity is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Universal Display and TE Connectivity

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

The idea behind Universal Display and TE Connectivity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.