Correlation Between Universal Display and Applied Materials

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

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

Diversification Opportunities for Universal Display and Applied Materials

-0.43

Correlation Coefficient

Universal Display  Applied Materials

Very good diversification

The 3 months correlation between Universal and Applied is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Universal Display i.e., Universal Display and Applied Materials go up and down completely randomly.

Pair Corralation between Universal Display and Applied Materials

Given the investment horizon of 90 days Universal Display is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Universal Display is 1.09 times less risky than Applied Materials. The stock trades about -0.06 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  17,060  in Applied Materials on September 14, 2025 and sell it today you would earn a total of  8,861  from holding Applied Materials or generate 51.94% return on investment over 90 days.

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

Universal Display  vs.  Applied Materials

Universal Display

Risk-Adjusted Performance

Weakest

Over the last 90 days Universal Display has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Display and Applied Materials

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

The idea behind Universal Display and Applied Materials 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.