Correlation Between Universal Music and Bionik Laboratories

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

Diversification Opportunities for Universal Music and Bionik Laboratories

0.12

Correlation Coefficient

Universal Music  Bionik Laboratories

Average diversification

The 3 months correlation between Universal and Bionik is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Bionik Laboratories Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bionik Laboratories Corp 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 Bionik Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bionik Laboratories Corp has no effect on the direction of Universal Music i.e., Universal Music and Bionik Laboratories go up and down completely randomly.

Pair Corralation between Universal Music and Bionik Laboratories

Assuming the 90 days horizon Universal Music is expected to generate 116.96 times less return on investment than Bionik Laboratories. But when comparing it to its historical volatility, Universal Music Group is 56.87 times less risky than Bionik Laboratories. It trades about 0.06 of its potential returns per unit of risk. Bionik Laboratories Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Bionik Laboratories Corp on December 27, 2024 and sell it today you would earn a total of  0.01  from holding Bionik Laboratories Corp or generate 9.223372036854776E16% return on investment over 90 days.

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

Universal Music Group  vs.  Bionik Laboratories Corp

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 4 (%) 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.

Bionik Laboratories Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bionik Laboratories Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Bionik Laboratories disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Music and Bionik Laboratories

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

The idea behind Universal Music Group and Bionik Laboratories Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.