Correlation Between Virgin Wines and Universal Display
Can any of the company-specific risk be diversified away by investing in both Virgin Wines and Universal Display 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 Virgin Wines and Universal Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virgin Wines UK and Universal Display Corp, you can compare the effects of market volatilities on Virgin Wines and Universal Display 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 Virgin Wines with a short position of Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and Universal Display.
Diversification Opportunities for Virgin Wines and Universal Display
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Virgin and Universal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Wines UK and Universal Display Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display Corp and Virgin Wines 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 Virgin Wines UK are associated (or correlated) with Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display Corp has no effect on the direction of Virgin Wines i.e., Virgin Wines and Universal Display go up and down completely randomly.
Pair Corralation between Virgin Wines and Universal Display
Assuming the 90 days trading horizon Virgin Wines UK is expected to generate 0.6 times more return on investment than Universal Display. However, Virgin Wines UK is 1.67 times less risky than Universal Display. It trades about -0.2 of its potential returns per unit of risk. Universal Display Corp is currently generating about -0.19 per unit of risk. If you would invest 4,050 in Virgin Wines UK on September 24, 2024 and sell it today you would lose (750.00) from holding Virgin Wines UK or give up 18.52% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.46% |
Values | Daily Returns |
Virgin Wines UK vs. Universal Display Corp
Performance |
Timeline |
Virgin Wines UK |
Universal Display Corp |
Virgin Wines and Universal Display Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Virgin Wines and Universal Display
The main advantage of trading using opposite Virgin Wines and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Wines position performs unexpectedly, Universal Display 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 Universal Display will offset losses from the drop in Universal Display's long position.Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Hyundai Motor | Virgin Wines vs. Toyota Motor Corp |
Universal Display vs. Electronic Arts | Universal Display vs. Samsung Electronics Co | Universal Display vs. Capital Drilling | Universal Display vs. Virgin Wines UK |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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