Correlation Between ViacomCBS and Universal Entertainment

Can any of the company-specific risk be diversified away by investing in both ViacomCBS and Universal Entertainment 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 ViacomCBS and Universal Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ViacomCBS and Universal Entertainment, you can compare the effects of market volatilities on ViacomCBS and Universal Entertainment 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 ViacomCBS with a short position of Universal Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ViacomCBS and Universal Entertainment.

Diversification Opportunities for ViacomCBS and Universal Entertainment

-0.62

Correlation Coefficient

ViacomCBS  Universal Entertainment

Excellent diversification

The 3 months correlation between ViacomCBS and Universal is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding ViacomCBS and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment and ViacomCBS 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 ViacomCBS are associated (or correlated) with Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of ViacomCBS i.e., ViacomCBS and Universal Entertainment go up and down completely randomly.

Pair Corralation between ViacomCBS and Universal Entertainment

Assuming the 90 days trading horizon ViacomCBS is expected to generate 0.73 times more return on investment than Universal Entertainment. However, ViacomCBS is 1.36 times less risky than Universal Entertainment. It trades about 0.05 of its potential returns per unit of risk. Universal Entertainment is currently generating about -0.15 per unit of risk. If you would invest  1,013  in ViacomCBS on October 6, 2024 and sell it today you would earn a total of  12.00  from holding ViacomCBS or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

ViacomCBS  vs.  Universal Entertainment

ViacomCBS

Risk-Adjusted Performance

6 of 100

Modest

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

Universal Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ViacomCBS and Universal Entertainment

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

The idea behind ViacomCBS and Universal Entertainment 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.