Correlation Between Universal Media and HeadsUp Entertainment

Can any of the company-specific risk be diversified away by investing in both Universal Media and HeadsUp Entertainment 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 Media and HeadsUp Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Universal Media Group and HeadsUp Entertainment International, you can compare the effects of market volatilities on Universal Media and HeadsUp Entertainment 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 Media with a short position of HeadsUp Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Media and HeadsUp Entertainment.

Diversification Opportunities for Universal Media and HeadsUp Entertainment

0.54

Correlation Coefficient

Universal Media  HeadsUp Entertainment

Very weak diversification

The 3 months correlation between Universal and HeadsUp is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Universal Media Group and HeadsUp Entertainment Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeadsUp Entertainment and Universal Media 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 Media Group are associated (or correlated) with HeadsUp Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeadsUp Entertainment has no effect on the direction of Universal Media i.e., Universal Media and HeadsUp Entertainment go up and down completely randomly.

Pair Corralation between Universal Media and HeadsUp Entertainment

Given the investment horizon of 90 days Universal Media Group is expected to generate 2.46 times more return on investment than HeadsUp Entertainment. However, Universal Media is 2.46 times more volatile than HeadsUp Entertainment International. It trades about 0.01 of its potential returns per unit of risk. HeadsUp Entertainment International is currently generating about 0.02 per unit of risk. If you would invest  5.00  in Universal Media Group on October 22, 2024 and sell it today you would lose (3.20) from holding Universal Media Group or give up 64.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Universal Media Group  vs.  HeadsUp Entertainment Internat

Universal Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively fragile technical and fundamental indicators, Universal Media reported solid returns over the last few months and may actually be approaching a breakup point.

HeadsUp Entertainment

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HeadsUp Entertainment International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HeadsUp Entertainment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Universal Media and HeadsUp Entertainment

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

The idea behind Universal Media Group and HeadsUp Entertainment International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.