Correlation Between UNIVERSAL MUSIC and GAMING FAC

Can any of the company-specific risk be diversified away by investing in both UNIVERSAL MUSIC and GAMING FAC 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 GAMING FAC 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 GAMING FAC SA, you can compare the effects of market volatilities on UNIVERSAL MUSIC and GAMING FAC 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 GAMING FAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNIVERSAL MUSIC and GAMING FAC.

Diversification Opportunities for UNIVERSAL MUSIC and GAMING FAC

-0.25

Correlation Coefficient

UNIVERSAL MUSIC  GAMING FAC

Very good diversification

The 3 months correlation between UNIVERSAL and GAMING is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and GAMING FAC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMING FAC SA 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 GAMING FAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMING FAC SA has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and GAMING FAC go up and down completely randomly.

Pair Corralation between UNIVERSAL MUSIC and GAMING FAC

Assuming the 90 days horizon UNIVERSAL MUSIC GROUP is expected to generate 0.61 times more return on investment than GAMING FAC. However, UNIVERSAL MUSIC GROUP is 1.63 times less risky than GAMING FAC. It trades about -0.03 of its potential returns per unit of risk. GAMING FAC SA is currently generating about -0.1 per unit of risk. If you would invest  2,687  in UNIVERSAL MUSIC GROUP on October 10, 2024 and sell it today you would lose (270.00) from holding UNIVERSAL MUSIC GROUP or give up 10.05% of portfolio value over 90 days.

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

UNIVERSAL MUSIC GROUP  vs.  GAMING FAC SA

UNIVERSAL MUSIC GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL MUSIC GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, UNIVERSAL MUSIC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

GAMING FAC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMING FAC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with UNIVERSAL MUSIC and GAMING FAC

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

The idea behind UNIVERSAL MUSIC GROUP and GAMING FAC SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.