Correlation Between Universal Display and Tokyo Electron

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

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

Diversification Opportunities for Universal Display and Tokyo Electron

0.39

Correlation Coefficient

Universal Display  Tokyo Electron

Weak diversification

The 3 months correlation between Universal and Tokyo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Tokyo Electron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of Universal Display i.e., Universal Display and Tokyo Electron go up and down completely randomly.

Pair Corralation between Universal Display and Tokyo Electron

Assuming the 90 days horizon Universal Display is expected to generate 1.29 times less return on investment than Tokyo Electron. But when comparing it to its historical volatility, Universal Display is 1.2 times less risky than Tokyo Electron. It trades about 0.05 of its potential returns per unit of risk. Tokyo Electron Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,253  in Tokyo Electron Limited on September 14, 2024 and sell it today you would earn a total of  6,292  from holding Tokyo Electron Limited or generate 68.0% return on investment over 90 days.

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

Universal Display  vs.  Tokyo Electron Limited

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tokyo Electron

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electron Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tokyo Electron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Display and Tokyo Electron

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

The idea behind Universal Display and Tokyo Electron Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.