Correlation Between UNIVERSAL MUSIC and ImagineAR

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

Diversification Opportunities for UNIVERSAL MUSIC and ImagineAR

0.27

Correlation Coefficient

UNIVERSAL MUSIC  ImagineAR

Modest diversification

The 3 months correlation between UNIVERSAL and ImagineAR is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and ImagineAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ImagineAR 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 ImagineAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ImagineAR has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and ImagineAR go up and down completely randomly.

Pair Corralation between UNIVERSAL MUSIC and ImagineAR

Assuming the 90 days horizon UNIVERSAL MUSIC is expected to generate 1.46 times less return on investment than ImagineAR. But when comparing it to its historical volatility, UNIVERSAL MUSIC GROUP is 6.68 times less risky than ImagineAR. It trades about 0.03 of its potential returns per unit of risk. ImagineAR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.15  in ImagineAR on December 24, 2024 and sell it today you would lose (1.40) from holding ImagineAR or give up 33.73% of portfolio value over 90 days.

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

UNIVERSAL MUSIC GROUP  vs.  ImagineAR

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 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.

ImagineAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days ImagineAR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ImagineAR is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UNIVERSAL MUSIC and ImagineAR

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

The idea behind UNIVERSAL MUSIC GROUP and ImagineAR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.