Correlation Between AIR PRODCHEMICALS and Universal Display

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

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

Diversification Opportunities for AIR PRODCHEMICALS and Universal Display

0.66

Correlation Coefficient

AIR PRODCHEMICALS  Universal Display

Poor diversification

The 3 months correlation between AIR and Universal is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Universal Display go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and Universal Display

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 2.33 times less return on investment than Universal Display. But when comparing it to its historical volatility, AIR PRODCHEMICALS is 2.1 times less risky than Universal Display. It trades about 0.16 of its potential returns per unit of risk. Universal Display is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  9,871  in Universal Display on April 20, 2025 and sell it today you would earn a total of  3,144  from holding Universal Display or generate 31.85% return on investment over 90 days.

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

AIR PRODCHEMICALS  vs.  Universal Display

AIR PRODCHEMICALS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AIR PRODCHEMICALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Display

Risk-Adjusted Performance

Good

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

Pair Trading with AIR PRODCHEMICALS and Universal Display

The main advantage of trading using opposite AIR PRODCHEMICALS and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS 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 AIR PRODCHEMICALS and Universal Display 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.