Correlation Between Waste Management and Universal Music
Can any of the company-specific risk be diversified away by investing in both Waste Management and Universal Music 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 Waste Management and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Universal Music Group, you can compare the effects of market volatilities on Waste Management and Universal Music 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 Waste Management with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Universal Music.
Diversification Opportunities for Waste Management and Universal Music
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Waste and Universal is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group and Waste Management 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 Waste Management are associated (or correlated) with Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Waste Management i.e., Waste Management and Universal Music go up and down completely randomly.
Pair Corralation between Waste Management and Universal Music
Assuming the 90 days trading horizon Waste Management is expected to generate 0.38 times more return on investment than Universal Music. However, Waste Management is 2.66 times less risky than Universal Music. It trades about -0.03 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.02 per unit of risk. If you would invest 21,801 in Waste Management on September 21, 2024 and sell it today you would lose (1,092) from holding Waste Management or give up 5.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Universal Music Group
Performance |
| Timeline |
| Waste Management |
| Universal Music Group |
Waste Management and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Universal Music
The main advantage of trading using opposite Waste Management and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, Universal Music 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 Music will offset losses from the drop in Universal Music's long position.| Waste Management vs. Samsung Electronics Co | Waste Management vs. Samsung Electronics Co | Waste Management vs. Hyundai Motor | Waste Management vs. Reliance Industries Ltd |
| Universal Music vs. Samsung Electronics Co | Universal Music vs. Samsung Electronics Co | Universal Music vs. Hyundai Motor | Universal Music vs. Reliance Industries Ltd |
Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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