Correlation Between Universal Music and UNIQA Insurance

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

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

Diversification Opportunities for Universal Music and UNIQA Insurance

0.26

Correlation Coefficient

Universal Music  UNIQA Insurance

Modest diversification

The 3 months correlation between Universal and UNIQA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and UNIQA Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIQA Insurance Group and Universal Music 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 Universal Music Group are associated (or correlated) with UNIQA Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIQA Insurance Group has no effect on the direction of Universal Music i.e., Universal Music and UNIQA Insurance go up and down completely randomly.

Pair Corralation between Universal Music and UNIQA Insurance

Assuming the 90 days trading horizon Universal Music is expected to generate 5.42 times less return on investment than UNIQA Insurance. In addition to that, Universal Music is 1.91 times more volatile than UNIQA Insurance Group. It trades about 0.04 of its total potential returns per unit of risk. UNIQA Insurance Group is currently generating about 0.41 per unit of volatility. If you would invest  783.00  in UNIQA Insurance Group on December 28, 2024 and sell it today you would earn a total of  223.00  from holding UNIQA Insurance Group or generate 28.48% return on investment over 90 days.

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

Universal Music Group  vs.  UNIQA Insurance Group

Universal Music Group

Risk-Adjusted Performance

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 fairly strong technical and fundamental indicators, Universal Music is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

UNIQA Insurance Group

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in UNIQA Insurance Group are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, UNIQA Insurance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Music and UNIQA Insurance

The main advantage of trading using opposite Universal Music and UNIQA Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, UNIQA Insurance 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 UNIQA Insurance will offset losses from the drop in UNIQA Insurance's long position.

The idea behind Universal Music Group and UNIQA Insurance 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.