Correlation Between UNIVERSAL MUSIC and Information Services

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

Diversification Opportunities for UNIVERSAL MUSIC and Information Services

0.44

Correlation Coefficient

UNIVERSAL MUSIC  Information Services

Very weak diversification

The 3 months correlation between UNIVERSAL and Information is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and Information Services Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and Information Services go up and down completely randomly.

Pair Corralation between UNIVERSAL MUSIC and Information Services

Assuming the 90 days horizon UNIVERSAL MUSIC is expected to generate 1.46 times less return on investment than Information Services. But when comparing it to its historical volatility, UNIVERSAL MUSIC GROUP is 1.69 times less risky than Information Services. It trades about 0.06 of its potential returns per unit of risk. Information Services International Dentsu is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,320  in Information Services International Dentsu on October 5, 2024 and sell it today you would earn a total of  200.00  from holding Information Services International Dentsu or generate 6.02% return on investment over 90 days.

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

UNIVERSAL MUSIC GROUP  vs.  Information Services Internati

UNIVERSAL MUSIC GROUP

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days UNIVERSAL MUSIC GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Information Services

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Information Services International Dentsu has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with UNIVERSAL MUSIC and Information Services

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

The idea behind UNIVERSAL MUSIC GROUP and Information Services International Dentsu 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.