Correlation Between Universal Music and Sabre Insurance

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

Diversification Opportunities for Universal Music and Sabre Insurance

-0.62

Correlation Coefficient

Universal Music  Sabre Insurance

Excellent diversification

The 3 months correlation between Universal and Sabre is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance 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 Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of Universal Music i.e., Universal Music and Sabre Insurance go up and down completely randomly.

Pair Corralation between Universal Music and Sabre Insurance

Assuming the 90 days trading horizon Universal Music Group is expected to generate 1.21 times more return on investment than Sabre Insurance. However, Universal Music is 1.21 times more volatile than Sabre Insurance Group. It trades about 0.04 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about -0.09 per unit of risk. If you would invest  2,475  in Universal Music Group on December 25, 2024 and sell it today you would earn a total of  86.00  from holding Universal Music Group or generate 3.47% return on investment over 90 days.

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

Universal Music Group  vs.  Sabre Insurance Group

Universal Music Group

Risk-Adjusted Performance

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

Sabre Insurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting 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.

Pair Trading with Universal Music and Sabre Insurance

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

The idea behind Universal Music Group and Sabre Insurance 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..