Correlation Between Caledonia Mining and Universal Music

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Can any of the company-specific risk be diversified away by investing in both Caledonia Mining 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 Caledonia Mining and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Mining and Universal Music Group, you can compare the effects of market volatilities on Caledonia Mining 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 Caledonia Mining with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Universal Music.

Diversification Opportunities for Caledonia Mining and Universal Music

CaledoniaUniversalDiversified AwayCaledoniaUniversalDiversified Away100%
0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Caledonia and Universal is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining 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 Caledonia Mining 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 Caledonia Mining 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 Caledonia Mining i.e., Caledonia Mining and Universal Music go up and down completely randomly.

Pair Corralation between Caledonia Mining and Universal Music

Assuming the 90 days trading horizon Caledonia Mining is expected to under-perform the Universal Music. In addition to that, Caledonia Mining is 2.03 times more volatile than Universal Music Group. It trades about -0.09 of its total potential returns per unit of risk. Universal Music Group is currently generating about 0.07 per unit of volatility. If you would invest  2,320  in Universal Music Group on September 15, 2024 and sell it today you would earn a total of  126.00  from holding Universal Music Group or generate 5.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Caledonia Mining  vs.  Universal Music Group

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -1001020
JavaScript chart by amCharts 3.21.15CMCL 0UMG
       Timeline  
Caledonia Mining 

Risk-Adjusted Performance

0 of 100

 
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Strong
Very Weak
Over the last 90 days Caledonia Mining 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec8009001,0001,1001,200
Universal Music Group 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Universal Music is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2222.52323.52424.5

Caledonia Mining and Universal Music Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.99-2.99-1.99-0.98-0.01530.891.82.723.644.56 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15CMCL 0UMG
       Returns  

Pair Trading with Caledonia Mining and Universal Music

The main advantage of trading using opposite Caledonia Mining and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Mining 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 Caledonia Mining 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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