Correlation Between Intermediate Capital and Universal Music

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

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

Diversification Opportunities for Intermediate Capital and Universal Music

0.11

Correlation Coefficient

Intermediate Capital  Universal Music

Average diversification

The 3 months correlation between Intermediate and Universal is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Capital Group 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 Intermediate Capital 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 Intermediate Capital Group 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 Intermediate Capital i.e., Intermediate Capital and Universal Music go up and down completely randomly.

Pair Corralation between Intermediate Capital and Universal Music

Assuming the 90 days trading horizon Intermediate Capital Group is expected to generate 0.92 times more return on investment than Universal Music. However, Intermediate Capital Group is 1.09 times less risky than Universal Music. It trades about 0.06 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  122,542  in Intermediate Capital Group on October 8, 2024 and sell it today you would earn a total of  82,858  from holding Intermediate Capital Group or generate 67.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Intermediate Capital Group  vs.  Universal Music Group

Intermediate Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Universal Music Group

Risk-Adjusted Performance

3 of 100

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. In spite of comparatively stable basic indicators, Universal Music is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Intermediate Capital and Universal Music

The main advantage of trading using opposite Intermediate Capital and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Capital 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 Intermediate Capital Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.