Correlation Between Universal Music and Hafnia

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

Diversification Opportunities for Universal Music and Hafnia

0.53

Correlation Coefficient

Universal Music  Hafnia

Very weak diversification

The 3 months correlation between Universal and Hafnia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Universal Music i.e., Universal Music and Hafnia go up and down completely randomly.

Pair Corralation between Universal Music and Hafnia

Assuming the 90 days horizon Universal Music is expected to generate 5.89 times less return on investment than Hafnia. But when comparing it to its historical volatility, Universal Music Group is 1.56 times less risky than Hafnia. It trades about 0.01 of its potential returns per unit of risk. Hafnia Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  361.00  in Hafnia Limited on October 23, 2024 and sell it today you would earn a total of  154.00  from holding Hafnia Limited or generate 42.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.81%
Values	Daily Returns

Universal Music Group  vs.  Hafnia Limited

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. In spite of fairly strong technical and fundamental indicators, Universal Music is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Hafnia is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Universal Music and Hafnia

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

The idea behind Universal Music Group and Hafnia Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.