Correlation Between UNIVERSAL MUSIC and Clean Energy

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

Diversification Opportunities for UNIVERSAL MUSIC and Clean Energy

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between UNIVERSAL and Clean is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels 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 Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and Clean Energy go up and down completely randomly.

Pair Corralation between UNIVERSAL MUSIC and Clean Energy

Assuming the 90 days horizon UNIVERSAL MUSIC GROUP is expected to generate 0.44 times more return on investment than Clean Energy. However, UNIVERSAL MUSIC GROUP is 2.26 times less risky than Clean Energy. It trades about 0.01 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about 0.0 per unit of risk. If you would invest  2,372  in UNIVERSAL MUSIC GROUP on September 23, 2024 and sell it today you would earn a total of  31.00  from holding UNIVERSAL MUSIC GROUP or generate 1.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

UNIVERSAL MUSIC GROUP  vs.  Clean Energy Fuels

 Performance 
       Timeline  
UNIVERSAL MUSIC GROUP 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL MUSIC GROUP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, UNIVERSAL MUSIC may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Clean Energy Fuels 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Clean Energy Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Clean Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

UNIVERSAL MUSIC and Clean Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with UNIVERSAL MUSIC and Clean Energy

The main advantage of trading using opposite UNIVERSAL MUSIC and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNIVERSAL MUSIC position performs unexpectedly, Clean Energy 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 Clean Energy will offset losses from the drop in Clean Energy's long position.
The idea behind UNIVERSAL MUSIC GROUP and Clean Energy Fuels 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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