Correlation Between Anheuser Busch and Universal Music

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

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

Diversification Opportunities for Anheuser Busch and Universal Music

0.31

Correlation Coefficient

Anheuser Busch  Universal Music

Weak diversification

The 3 months correlation between Anheuser and Universal is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group and Anheuser Busch 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 Anheuser Busch InBev SANV are associated (or correlated) with Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and Universal Music go up and down completely randomly.

Pair Corralation between Anheuser Busch and Universal Music

Assuming the 90 days trading horizon Anheuser Busch InBev SANV is expected to generate 0.84 times more return on investment than Universal Music. However, Anheuser Busch InBev SANV is 1.19 times less risky than Universal Music. It trades about 0.19 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.05 per unit of risk. If you would invest  4,818  in Anheuser Busch InBev SANV on December 29, 2024 and sell it today you would earn a total of  956.00  from holding Anheuser Busch InBev SANV or generate 19.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Anheuser Busch InBev SANV  vs.  Universal Music Group

Anheuser Busch InBev

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch InBev SANV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Anheuser Busch demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Universal Music Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Universal Music is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Anheuser Busch and Universal Music

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

The idea behind Anheuser Busch InBev SANV and Universal Music Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.