Correlation Between Fidelity National and Universal Music

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

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

Diversification Opportunities for Fidelity National and Universal Music

-0.4

Correlation Coefficient

Fidelity National  Universal Music

Very good diversification

The 3 months correlation between Fidelity and Universal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group and Fidelity National 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 Fidelity National Information are associated (or correlated) with Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Fidelity National i.e., Fidelity National and Universal Music go up and down completely randomly.

Pair Corralation between Fidelity National and Universal Music

Assuming the 90 days trading horizon Fidelity National Information is expected to generate 1.78 times more return on investment than Universal Music. However, Fidelity National is 1.78 times more volatile than Universal Music Group. It trades about 0.02 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.02 per unit of risk. If you would invest  7,024  in Fidelity National Information on October 11, 2024 and sell it today you would earn a total of  874.00  from holding Fidelity National Information or generate 12.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.8%
Values	Daily Returns

Fidelity National Information  vs.  Universal Music Group

Fidelity National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity National Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Universal Music Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Universal Music is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity National and Universal Music

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

The idea behind Fidelity National Information and Universal Music Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.