Correlation Between CHINA DISPLAY and Murata Manufacturing

Can any of the company-specific risk be diversified away by investing in both CHINA DISPLAY and Murata Manufacturing 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 CHINA DISPLAY and Murata Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA DISPLAY OTHHD 10 and Murata Manufacturing Co, you can compare the effects of market volatilities on CHINA DISPLAY and Murata Manufacturing 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 CHINA DISPLAY with a short position of Murata Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA DISPLAY and Murata Manufacturing.

Diversification Opportunities for CHINA DISPLAY and Murata Manufacturing

-0.16

Correlation Coefficient

CHINA DISPLAY  Murata Manufacturing

Good diversification

The 3 months correlation between CHINA and Murata is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CHINA DISPLAY OTHHD 10 and Murata Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murata Manufacturing and CHINA DISPLAY 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 CHINA DISPLAY OTHHD 10 are associated (or correlated) with Murata Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murata Manufacturing has no effect on the direction of CHINA DISPLAY i.e., CHINA DISPLAY and Murata Manufacturing go up and down completely randomly.

Pair Corralation between CHINA DISPLAY and Murata Manufacturing

Assuming the 90 days trading horizon CHINA DISPLAY OTHHD 10 is expected to generate 1.94 times more return on investment than Murata Manufacturing. However, CHINA DISPLAY is 1.94 times more volatile than Murata Manufacturing Co. It trades about 0.12 of its potential returns per unit of risk. Murata Manufacturing Co is currently generating about 0.01 per unit of risk. If you would invest  1.70  in CHINA DISPLAY OTHHD 10 on April 20, 2025 and sell it today you would earn a total of  0.50  from holding CHINA DISPLAY OTHHD 10 or generate 29.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

CHINA DISPLAY OTHHD 10  vs.  Murata Manufacturing Co

CHINA DISPLAY OTHHD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA DISPLAY OTHHD 10 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, CHINA DISPLAY reported solid returns over the last few months and may actually be approaching a breakup point.

Murata Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Murata Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Murata Manufacturing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA DISPLAY and Murata Manufacturing

The main advantage of trading using opposite CHINA DISPLAY and Murata Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA DISPLAY position performs unexpectedly, Murata Manufacturing 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 Murata Manufacturing will offset losses from the drop in Murata Manufacturing's long position.

The idea behind CHINA DISPLAY OTHHD 10 and Murata Manufacturing Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..