Correlation Between Universal Display and Nintendo

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

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

Diversification Opportunities for Universal Display and Nintendo

-0.58

Correlation Coefficient

Universal Display  Nintendo

Excellent diversification

The 3 months correlation between Universal and Nintendo is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Nintendo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo 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 Nintendo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nintendo has no effect on the direction of Universal Display i.e., Universal Display and Nintendo go up and down completely randomly.

Pair Corralation between Universal Display and Nintendo

Assuming the 90 days horizon Universal Display is expected to generate 7.26 times less return on investment than Nintendo. In addition to that, Universal Display is 1.43 times more volatile than Nintendo Co. It trades about 0.01 of its total potential returns per unit of risk. Nintendo Co is currently generating about 0.06 per unit of volatility. If you would invest  4,371  in Nintendo Co on September 4, 2024 and sell it today you would earn a total of  1,233  from holding Nintendo Co or generate 28.21% 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.  Nintendo Co

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. Despite nearly stable basic indicators, Universal Display is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nintendo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Display and Nintendo

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

The idea behind Universal Display and Nintendo Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.