Correlation Between Townsquare Media and Universal Entertainment

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

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

Diversification Opportunities for Townsquare Media and Universal Entertainment

-0.43

Correlation Coefficient

Townsquare Media  Universal Entertainment

Very good diversification

The 3 months correlation between Townsquare and Universal is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Townsquare Media and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment and Townsquare Media 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 Townsquare Media 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 Townsquare Media i.e., Townsquare Media and Universal Entertainment go up and down completely randomly.

Pair Corralation between Townsquare Media and Universal Entertainment

Assuming the 90 days horizon Townsquare Media is expected to generate 0.53 times more return on investment than Universal Entertainment. However, Townsquare Media is 1.88 times less risky than Universal Entertainment. It trades about 0.03 of its potential returns per unit of risk. Universal Entertainment is currently generating about -0.09 per unit of risk. If you would invest  905.00  in Townsquare Media on September 4, 2024 and sell it today you would earn a total of  20.00  from holding Townsquare Media or generate 2.21% return on investment over 90 days.

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

Townsquare Media  vs.  Universal Entertainment

Townsquare Media

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Townsquare Media are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Townsquare Media is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Townsquare Media and Universal Entertainment

The main advantage of trading using opposite Townsquare Media and Universal Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Townsquare Media 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 Townsquare Media 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.