Correlation Between IMPERIAL TOBACCO and Universal Display

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

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

Diversification Opportunities for IMPERIAL TOBACCO and Universal Display

-0.47

Correlation Coefficient

IMPERIAL TOBACCO  Universal Display

Very good diversification

The 3 months correlation between IMPERIAL and Universal is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Universal Display go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and Universal Display

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to under-perform the Universal Display. But the stock apears to be less risky and, when comparing its historical volatility, IMPERIAL TOBACCO is 1.82 times less risky than Universal Display. The stock trades about -0.01 of its potential returns per unit of risk. The Universal Display is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,529  in Universal Display on April 23, 2025 and sell it today you would earn a total of  2,476  from holding Universal Display or generate 23.52% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  Universal Display

IMPERIAL TOBACCO

Risk-Adjusted Performance

Very Weak

Over the last 90 days IMPERIAL TOBACCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IMPERIAL TOBACCO is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Universal Display

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Display are ranked lower than 11 (%) 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 IMPERIAL TOBACCO and Universal Display

The main advantage of trading using opposite IMPERIAL TOBACCO and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.