Correlation Between Universal Music and INGEVITY

Can any of the company-specific risk be diversified away by investing in both Universal Music and INGEVITY 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 INGEVITY 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 INGEVITY P 3875, you can compare the effects of market volatilities on Universal Music and INGEVITY 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 INGEVITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and INGEVITY.

Diversification Opportunities for Universal Music and INGEVITY

-0.1

Correlation Coefficient

Universal Music  INGEVITY

Good diversification

The 3 months correlation between Universal and INGEVITY is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and INGEVITY P 3875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGEVITY P 3875 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 INGEVITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGEVITY P 3875 has no effect on the direction of Universal Music i.e., Universal Music and INGEVITY go up and down completely randomly.

Pair Corralation between Universal Music and INGEVITY

Assuming the 90 days horizon Universal Music Group is expected to generate 3.73 times more return on investment than INGEVITY. However, Universal Music is 3.73 times more volatile than INGEVITY P 3875. It trades about 0.01 of its potential returns per unit of risk. INGEVITY P 3875 is currently generating about 0.0 per unit of risk. If you would invest  2,670  in Universal Music Group on October 3, 2024 and sell it today you would lose (103.00) from holding Universal Music Group or give up 3.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.13%
Values	Daily Returns

Universal Music Group  vs.  INGEVITY P 3875

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

INGEVITY P 3875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGEVITY P 3875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for INGEVITY P 3875 investors.

Pair Trading with Universal Music and INGEVITY

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

The idea behind Universal Music Group and INGEVITY P 3875 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.