Correlation Between Universal Music and Universal Media

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

Diversification Opportunities for Universal Music and Universal Media

0.47

Correlation Coefficient

Universal Music  Universal Media

Very weak diversification

The 3 months correlation between Universal and Universal is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Universal Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Media Group 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 Universal Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Media Group has no effect on the direction of Universal Music i.e., Universal Music and Universal Media go up and down completely randomly.

Pair Corralation between Universal Music and Universal Media

Assuming the 90 days horizon Universal Music Group is expected to generate 0.09 times more return on investment than Universal Media. However, Universal Music Group is 10.64 times less risky than Universal Media. It trades about 0.07 of its potential returns per unit of risk. Universal Media Group is currently generating about -0.02 per unit of risk. If you would invest  1,230  in Universal Music Group on October 10, 2024 and sell it today you would earn a total of  20.00  from holding Universal Music Group or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Universal Music Group  vs.  Universal Media Group

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.

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 invariable technical and fundamental indicators, Universal Media is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Universal Music and Universal Media

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

The idea behind Universal Music Group and Universal Media Group 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.