Correlation Between Universal Music and Hyundai

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

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

Diversification Opportunities for Universal Music and Hyundai

-0.07

Correlation Coefficient

Universal Music  Hyundai

Good diversification

The 3 months correlation between Universal and Hyundai is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Universal Music 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 Music Group are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Universal Music i.e., Universal Music and Hyundai go up and down completely randomly.

Pair Corralation between Universal Music and Hyundai

Assuming the 90 days trading horizon Universal Music is expected to generate 4.01 times less return on investment than Hyundai. But when comparing it to its historical volatility, Universal Music Group is 1.07 times less risky than Hyundai. It trades about 0.02 of its potential returns per unit of risk. Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,643  in Hyundai Motor on September 24, 2024 and sell it today you would earn a total of  2,637  from holding Hyundai Motor or generate 99.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.81%
Values	Daily Returns

Universal Music Group  vs.  Hyundai Motor

Universal Music Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 6 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Universal Music and Hyundai

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

The idea behind Universal Music Group and Hyundai Motor 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.