Correlation Between Universal Music and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Universal Music and Cincinnati Financial 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 Cincinnati Financial 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 Cincinnati Financial Corp, you can compare the effects of market volatilities on Universal Music and Cincinnati Financial 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 Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Cincinnati Financial.
Diversification Opportunities for Universal Music and Cincinnati Financial
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and Cincinnati is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp 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 Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial Corp has no effect on the direction of Universal Music i.e., Universal Music and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Universal Music and Cincinnati Financial
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.47 times more return on investment than Cincinnati Financial. However, Universal Music Group is 2.12 times less risky than Cincinnati Financial. It trades about -0.04 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.13 per unit of risk. If you would invest 2,469 in Universal Music Group on October 25, 2024 and sell it today you would lose (17.00) from holding Universal Music Group or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Cincinnati Financial Corp
Performance |
| Timeline |
| Universal Music Group |
| Cincinnati Financial Corp |
Universal Music and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Cincinnati Financial
The main advantage of trading using opposite Universal Music and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| Universal Music vs. Toyota Motor Corp | Universal Music vs. SoftBank Group Corp | Universal Music vs. OTP Bank Nyrt | Universal Music vs. ONEOK Inc |
| Cincinnati Financial vs. Erste Group Bank | Cincinnati Financial vs. Check Point Software | Cincinnati Financial vs. Software Circle plc | Cincinnati Financial vs. Vitec Software Group |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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