Correlation Between WILLIS LEASE and UNIVMUSIC GRPADR050

Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE and UNIVMUSIC GRPADR050 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 WILLIS LEASE and UNIVMUSIC GRPADR050 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WILLIS LEASE FIN and UNIVMUSIC GRPADR050, you can compare the effects of market volatilities on WILLIS LEASE and UNIVMUSIC GRPADR050 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 WILLIS LEASE with a short position of UNIVMUSIC GRPADR050. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and UNIVMUSIC GRPADR050.

Diversification Opportunities for WILLIS LEASE and UNIVMUSIC GRPADR050

-0.41

Correlation Coefficient

WILLIS LEASE  UNIVMUSIC GRPADR050

Very good diversification

The 3 months correlation between WILLIS and UNIVMUSIC is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and UNIVMUSIC GRPADR050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVMUSIC GRPADR050 and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with UNIVMUSIC GRPADR050. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVMUSIC GRPADR050 has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and UNIVMUSIC GRPADR050 go up and down completely randomly.

Pair Corralation between WILLIS LEASE and UNIVMUSIC GRPADR050

Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the UNIVMUSIC GRPADR050. In addition to that, WILLIS LEASE is 1.8 times more volatile than UNIVMUSIC GRPADR050. It trades about -0.08 of its total potential returns per unit of risk. UNIVMUSIC GRPADR050 is currently generating about 0.06 per unit of volatility. If you would invest  1,210  in UNIVMUSIC GRPADR050 on December 30, 2024 and sell it today you would earn a total of  70.00  from holding UNIVMUSIC GRPADR050 or generate 5.79% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  UNIVMUSIC GRPADR050

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

UNIVMUSIC GRPADR050

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVMUSIC GRPADR050 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, UNIVMUSIC GRPADR050 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WILLIS LEASE and UNIVMUSIC GRPADR050

The main advantage of trading using opposite WILLIS LEASE and UNIVMUSIC GRPADR050 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE position performs unexpectedly, UNIVMUSIC GRPADR050 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 UNIVMUSIC GRPADR050 will offset losses from the drop in UNIVMUSIC GRPADR050's long position.

The idea behind WILLIS LEASE FIN and UNIVMUSIC GRPADR050 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.