Correlation Between Universal Music and KROGER

Can any of the company-specific risk be diversified away by investing in both Universal Music and KROGER 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 KROGER 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 KROGER 75 percent, you can compare the effects of market volatilities on Universal Music and KROGER 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 KROGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and KROGER.

Diversification Opportunities for Universal Music and KROGER

-0.22

Correlation Coefficient

Universal Music  KROGER

Very good diversification

The 3 months correlation between Universal and KROGER is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and KROGER 75 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER 75 percent 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 KROGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KROGER 75 percent has no effect on the direction of Universal Music i.e., Universal Music and KROGER go up and down completely randomly.

Pair Corralation between Universal Music and KROGER

Assuming the 90 days horizon Universal Music Group is expected to generate 3.6 times more return on investment than KROGER. However, Universal Music is 3.6 times more volatile than KROGER 75 percent. It trades about 0.11 of its potential returns per unit of risk. KROGER 75 percent is currently generating about -0.01 per unit of risk. If you would invest  2,418  in Universal Music Group on December 3, 2024 and sell it today you would earn a total of  352.00  from holding Universal Music Group or generate 14.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Universal Music Group  vs.  KROGER 75 percent

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 8 (%) 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.

KROGER 75 percent

Risk-Adjusted Performance

Very Weak

Over the last 90 days KROGER 75 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KROGER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Universal Music and KROGER

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

The idea behind Universal Music Group and KROGER 75 percent 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.