Correlation Between X FAB and Universal Display

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

By analyzing existing cross correlation between X FAB Silicon Foundries and Universal Display Corp, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Universal Display.

Diversification Opportunities for X FAB and Universal Display

0.76

Correlation Coefficient

X FAB  Universal Display

Poor diversification

The 3 months correlation between 0ROZ and Universal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries 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 X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Universal Display go up and down completely randomly.

Pair Corralation between X FAB and Universal Display

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 0.82 times more return on investment than Universal Display. However, X FAB Silicon Foundries is 1.21 times less risky than Universal Display. It trades about 0.32 of its potential returns per unit of risk. Universal Display Corp is currently generating about 0.17 per unit of risk. If you would invest  406.00  in X FAB Silicon Foundries on April 22, 2025 and sell it today you would earn a total of  267.00  from holding X FAB Silicon Foundries or generate 65.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.42%
Values	Daily Returns

X FAB Silicon Foundries  vs.  Universal Display Corp

X FAB Silicon

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, X FAB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Display Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Display Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Universal Display unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and Universal Display

The main advantage of trading using opposite X FAB and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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.

The idea behind X FAB Silicon Foundries and Universal Display Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.