Correlation Between Spirent Communications and Universal Display

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

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

Diversification Opportunities for Spirent Communications and Universal Display

0.71

Correlation Coefficient

Spirent Communications  Universal Display

Poor diversification

The 3 months correlation between Spirent and Universal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Universal Display go up and down completely randomly.

Pair Corralation between Spirent Communications and Universal Display

Assuming the 90 days horizon Spirent Communications is expected to generate 6.53 times less return on investment than Universal Display. But when comparing it to its historical volatility, Spirent Communications plc is 1.15 times less risky than Universal Display. It trades about 0.02 of its potential returns per unit of risk. Universal Display is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,450  in Universal Display on April 24, 2025 and sell it today you would earn a total of  2,325  from holding Universal Display or generate 22.25% return on investment over 90 days.

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

Spirent Communications plc  vs.  Universal Display

Spirent Communications

Risk-Adjusted Performance

Weak

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

Universal Display

Risk-Adjusted Performance

Good

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

Pair Trading with Spirent Communications and Universal Display

The main advantage of trading using opposite Spirent Communications and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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 Spirent Communications plc 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.