Correlation Between Universal Music and Made Tech

Can any of the company-specific risk be diversified away by investing in both Universal Music and Made Tech 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 Made Tech 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 Made Tech Group, you can compare the effects of market volatilities on Universal Music and Made Tech 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 Made Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Made Tech.

Diversification Opportunities for Universal Music and Made Tech

0.76

Correlation Coefficient

Universal Music  Made Tech

Poor diversification

The 3 months correlation between Universal and Made is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Made Tech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Made Tech Group 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 Made Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Made Tech Group has no effect on the direction of Universal Music i.e., Universal Music and Made Tech go up and down completely randomly.

Pair Corralation between Universal Music and Made Tech

Assuming the 90 days trading horizon Universal Music is expected to generate 2.13 times less return on investment than Made Tech. But when comparing it to its historical volatility, Universal Music Group is 1.79 times less risky than Made Tech. It trades about 0.04 of its potential returns per unit of risk. Made Tech Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,450  in Made Tech Group on December 24, 2024 and sell it today you would earn a total of  175.00  from holding Made Tech Group or generate 7.14% return on investment over 90 days.

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

Universal Music Group  vs.  Made Tech Group

Universal Music Group

Risk-Adjusted Performance

Weak

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Made Tech Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Made Tech Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Made Tech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Universal Music and Made Tech

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

The idea behind Universal Music Group and Made Tech 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.