Correlation Between UNIVMUSIC GRPADR/050 and TreeHouse Foods

Can any of the company-specific risk be diversified away by investing in both UNIVMUSIC GRPADR/050 and TreeHouse Foods 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 UNIVMUSIC GRPADR/050 and TreeHouse Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UNIVMUSIC GRPADR050 and TreeHouse Foods, you can compare the effects of market volatilities on UNIVMUSIC GRPADR/050 and TreeHouse Foods 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 UNIVMUSIC GRPADR/050 with a short position of TreeHouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNIVMUSIC GRPADR/050 and TreeHouse Foods.

Diversification Opportunities for UNIVMUSIC GRPADR/050 and TreeHouse Foods

0.15

Correlation Coefficient

UNIVMUSIC GRPADR/050  TreeHouse Foods

Average diversification

The 3 months correlation between UNIVMUSIC and TreeHouse is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding UNIVMUSIC GRPADR050 and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods and UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR050 are associated (or correlated) with TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of UNIVMUSIC GRPADR/050 i.e., UNIVMUSIC GRPADR/050 and TreeHouse Foods go up and down completely randomly.

Pair Corralation between UNIVMUSIC GRPADR/050 and TreeHouse Foods

Assuming the 90 days trading horizon UNIVMUSIC GRPADR050 is expected to generate 0.61 times more return on investment than TreeHouse Foods. However, UNIVMUSIC GRPADR050 is 1.65 times less risky than TreeHouse Foods. It trades about 0.36 of its potential returns per unit of risk. TreeHouse Foods is currently generating about 0.1 per unit of risk. If you would invest  1,130  in UNIVMUSIC GRPADR050 on October 5, 2024 and sell it today you would earn a total of  80.00  from holding UNIVMUSIC GRPADR050 or generate 7.08% return on investment over 90 days.

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

UNIVMUSIC GRPADR050  vs.  TreeHouse Foods

UNIVMUSIC GRPADR/050

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days UNIVMUSIC GRPADR050 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, UNIVMUSIC GRPADR/050 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TreeHouse Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with UNIVMUSIC GRPADR/050 and TreeHouse Foods

The main advantage of trading using opposite UNIVMUSIC GRPADR/050 and TreeHouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNIVMUSIC GRPADR/050 position performs unexpectedly, TreeHouse Foods 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 TreeHouse Foods will offset losses from the drop in TreeHouse Foods' long position.

The idea behind UNIVMUSIC GRPADR050 and TreeHouse Foods 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.