Correlation Between Emerson Radio and Universal Music

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

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

Diversification Opportunities for Emerson Radio and Universal Music

0.53

Correlation Coefficient

Emerson Radio  Universal Music

Very weak diversification

The 3 months correlation between Emerson and Universal is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio 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 Emerson Radio 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 Emerson Radio 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 Emerson Radio i.e., Emerson Radio and Universal Music go up and down completely randomly.

Pair Corralation between Emerson Radio and Universal Music

Considering the 90-day investment horizon Emerson Radio is expected to under-perform the Universal Music. In addition to that, Emerson Radio is 1.1 times more volatile than Universal Music Group. It trades about -0.1 of its total potential returns per unit of risk. Universal Music Group is currently generating about 0.21 per unit of volatility. If you would invest  2,396  in Universal Music Group on September 19, 2024 and sell it today you would earn a total of  280.00  from holding Universal Music Group or generate 11.69% return on investment over 90 days.

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

Emerson Radio  vs.  Universal Music Group

Emerson Radio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerson Radio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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. 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 Emerson Radio and Universal Music

The main advantage of trading using opposite Emerson Radio and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio 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 Emerson Radio 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.