Correlation Between Universal Music and Freeport

Can any of the company-specific risk be diversified away by investing in both Universal Music and Freeport 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 Freeport 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 Freeport McMoRan 425 percent, you can compare the effects of market volatilities on Universal Music and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Freeport.

Diversification Opportunities for Universal Music and Freeport

-0.01

Correlation Coefficient

Universal Music  Freeport

Good diversification

The 3 months correlation between Universal and Freeport is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Freeport McMoRan 425 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 425 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 425 has no effect on the direction of Universal Music i.e., Universal Music and Freeport go up and down completely randomly.

Pair Corralation between Universal Music and Freeport

Assuming the 90 days horizon Universal Music Group is expected to generate 2.18 times more return on investment than Freeport. However, Universal Music is 2.18 times more volatile than Freeport McMoRan 425 percent. It trades about 0.06 of its potential returns per unit of risk. Freeport McMoRan 425 percent is currently generating about -0.05 per unit of risk. If you would invest  1,293  in Universal Music Group on December 26, 2024 and sell it today you would earn a total of  89.00  from holding Universal Music Group or generate 6.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Universal Music Group  vs.  Freeport McMoRan 425 percent

Universal Music Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Universal Music may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Freeport McMoRan 425

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freeport McMoRan 425 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport 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 Freeport

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

The idea behind Universal Music Group and Freeport McMoRan 425 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.