Correlation Between MULTI-CHEM and UNIVERSAL MUSIC

Can any of the company-specific risk be diversified away by investing in both MULTI-CHEM 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 MULTI-CHEM and UNIVERSAL MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MULTI CHEM LTD and UNIVERSAL MUSIC GROUP, you can compare the effects of market volatilities on MULTI-CHEM 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 MULTI-CHEM with a short position of UNIVERSAL MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MULTI-CHEM and UNIVERSAL MUSIC.

Diversification Opportunities for MULTI-CHEM and UNIVERSAL MUSIC

-0.2

Correlation Coefficient

MULTI-CHEM  UNIVERSAL MUSIC

Good diversification

The 3 months correlation between MULTI-CHEM and UNIVERSAL is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding MULTI CHEM LTD 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 MULTI-CHEM 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 MULTI CHEM LTD 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 MULTI-CHEM i.e., MULTI-CHEM and UNIVERSAL MUSIC go up and down completely randomly.

Pair Corralation between MULTI-CHEM and UNIVERSAL MUSIC

Assuming the 90 days trading horizon MULTI-CHEM is expected to generate 1.1 times less return on investment than UNIVERSAL MUSIC. In addition to that, MULTI-CHEM is 2.06 times more volatile than UNIVERSAL MUSIC GROUP. It trades about 0.06 of its total potential returns per unit of risk. UNIVERSAL MUSIC GROUP is currently generating about 0.13 per unit of volatility. If you would invest  2,348  in UNIVERSAL MUSIC GROUP on October 9, 2024 and sell it today you would earn a total of  69.00  from holding UNIVERSAL MUSIC GROUP or generate 2.94% return on investment over 90 days.

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

MULTI CHEM LTD  vs.  UNIVERSAL MUSIC GROUP

MULTI CHEM LTD

Risk-Adjusted Performance

2 of 100

Weak

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

UNIVERSAL MUSIC GROUP

Risk-Adjusted Performance

2 of 100

Insignificant

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

Pair Trading with MULTI-CHEM and UNIVERSAL MUSIC

The main advantage of trading using opposite MULTI-CHEM and UNIVERSAL MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MULTI-CHEM 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 MULTI CHEM LTD 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..