Correlation Between Universal Music and Aegon NV

Can any of the company-specific risk be diversified away by investing in both Universal Music and Aegon NV 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 Aegon NV 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 Aegon NV ADR, you can compare the effects of market volatilities on Universal Music and Aegon NV 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 Aegon NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Aegon NV.

Diversification Opportunities for Universal Music and Aegon NV

0.48

Correlation Coefficient

Universal Music  Aegon NV

Very weak diversification

The 3 months correlation between Universal and Aegon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR 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 Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of Universal Music i.e., Universal Music and Aegon NV go up and down completely randomly.

Pair Corralation between Universal Music and Aegon NV

Assuming the 90 days horizon Universal Music is expected to generate 1.36 times less return on investment than Aegon NV. In addition to that, Universal Music is 1.13 times more volatile than Aegon NV ADR. It trades about 0.08 of its total potential returns per unit of risk. Aegon NV ADR is currently generating about 0.12 per unit of volatility. If you would invest  586.00  in Aegon NV ADR on December 29, 2024 and sell it today you would earn a total of  87.00  from holding Aegon NV ADR or generate 14.85% return on investment over 90 days.

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

Universal Music Group  vs.  Aegon NV ADR

Universal Music Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Music may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aegon NV ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Aegon NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Music and Aegon NV

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

The idea behind Universal Music Group and Aegon NV ADR 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.