Correlation Between UNIVERSAL DISPLAY and Webster Financial

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

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

Diversification Opportunities for UNIVERSAL DISPLAY and Webster Financial

0.74

Correlation Coefficient

UNIVERSAL DISPLAY  Webster Financial

Poor diversification

The 3 months correlation between UNIVERSAL and Webster is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL DISPLAY and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and UNIVERSAL 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 UNIVERSAL DISPLAY are associated (or correlated) with Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of UNIVERSAL DISPLAY i.e., UNIVERSAL DISPLAY and Webster Financial go up and down completely randomly.

Pair Corralation between UNIVERSAL DISPLAY and Webster Financial

Assuming the 90 days trading horizon UNIVERSAL DISPLAY is expected to generate 1.23 times more return on investment than Webster Financial. However, UNIVERSAL DISPLAY is 1.23 times more volatile than Webster Financial. It trades about 0.15 of its potential returns per unit of risk. Webster Financial is currently generating about 0.14 per unit of risk. If you would invest  10,474  in UNIVERSAL DISPLAY on April 23, 2025 and sell it today you would earn a total of  2,466  from holding UNIVERSAL DISPLAY or generate 23.54% return on investment over 90 days.

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

UNIVERSAL DISPLAY  vs.  Webster Financial

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. In spite of comparatively uncertain fundamental indicators, UNIVERSAL DISPLAY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Webster Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Webster Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNIVERSAL DISPLAY and Webster Financial

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

The idea behind UNIVERSAL DISPLAY and Webster Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.