Correlation Between Graham Holdings and Universal Music

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

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

Diversification Opportunities for Graham Holdings and Universal Music

-0.63

Correlation Coefficient

Graham Holdings  Universal Music

Excellent diversification

The 3 months correlation between Graham and Universal is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co 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 Graham Holdings 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 Graham Holdings Co 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 Graham Holdings i.e., Graham Holdings and Universal Music go up and down completely randomly.

Pair Corralation between Graham Holdings and Universal Music

Considering the 90-day investment horizon Graham Holdings Co is expected to generate 1.86 times more return on investment than Universal Music. However, Graham Holdings is 1.86 times more volatile than Universal Music Group. It trades about 0.13 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.02 per unit of risk. If you would invest  77,006  in Graham Holdings Co on October 25, 2024 and sell it today you would earn a total of  13,604  from holding Graham Holdings Co or generate 17.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Graham Holdings Co  vs.  Universal Music Group

Graham Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Graham Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Universal Music Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Universal Music is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Graham Holdings and Universal Music

The main advantage of trading using opposite Graham Holdings and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham Holdings 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 Graham Holdings Co 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.

Check out your portfolio center.

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.