Correlation Between Universal Music and Consol Energy

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

Diversification Opportunities for Universal Music and Consol Energy

-0.77

Correlation Coefficient

Universal Music  Consol Energy

Pay attention - limited upside

The 3 months correlation between Universal and Consol is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy 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 Consol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consol Energy has no effect on the direction of Universal Music i.e., Universal Music and Consol Energy go up and down completely randomly.

Pair Corralation between Universal Music and Consol Energy

Assuming the 90 days horizon Universal Music Group is expected to generate 1.39 times more return on investment than Consol Energy. However, Universal Music is 1.39 times more volatile than Consol Energy. It trades about 0.17 of its potential returns per unit of risk. Consol Energy is currently generating about -0.62 per unit of risk. If you would invest  2,365  in Universal Music Group on September 27, 2024 and sell it today you would earn a total of  199.00  from holding Universal Music Group or generate 8.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Universal Music Group  vs.  Consol Energy

Universal Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Consol Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consol Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Consol Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Universal Music and Consol Energy

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

The idea behind Universal Music Group and Consol Energy 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 Transaction History module to view history of all your transactions and understand their impact on performance.