Correlation Between Universal Music and Biglari Holdings

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

Diversification Opportunities for Universal Music and Biglari Holdings

0.41

Correlation Coefficient

Universal Music  Biglari Holdings

Very weak diversification

The 3 months correlation between Universal and Biglari is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings 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 Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Universal Music i.e., Universal Music and Biglari Holdings go up and down completely randomly.

Pair Corralation between Universal Music and Biglari Holdings

Assuming the 90 days horizon Universal Music Group is expected to generate 1.02 times more return on investment than Biglari Holdings. However, Universal Music is 1.02 times more volatile than Biglari Holdings. It trades about 0.13 of its potential returns per unit of risk. Biglari Holdings is currently generating about -0.01 per unit of risk. If you would invest  2,497  in Universal Music Group on December 2, 2024 and sell it today you would earn a total of  273.00  from holding Universal Music Group or generate 10.93% 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.  Biglari Holdings

Universal Music Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Music reported solid returns over the last few months and may actually be approaching a breakup point.

Biglari Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Music and Biglari Holdings

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

The idea behind Universal Music Group and Biglari Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.