Correlation Between Universal Music and Global Net
Can any of the company-specific risk be diversified away by investing in both Universal Music and Global Net 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 Global Net 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 Global Net Lease, you can compare the effects of market volatilities on Universal Music and Global Net 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 Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Global Net.
Diversification Opportunities for Universal Music and Global Net
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Universal and Global is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease 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 Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Universal Music i.e., Universal Music and Global Net go up and down completely randomly.
Pair Corralation between Universal Music and Global Net
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.84 times more return on investment than Global Net. However, Universal Music Group is 1.19 times less risky than Global Net. It trades about 0.22 of its potential returns per unit of risk. Global Net Lease is currently generating about -0.13 per unit of risk. If you would invest 2,302 in Universal Music Group on September 13, 2024 and sell it today you would earn a total of 125.00 from holding Universal Music Group or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Global Net Lease
Performance |
| Timeline |
| Universal Music Group |
| Global Net Lease |
Universal Music and Global Net Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Global Net
The main advantage of trading using opposite Universal Music and Global Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Global Net 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 Global Net will offset losses from the drop in Global Net's long position.| Universal Music vs. Sunny Optical Technology | Universal Music vs. Take Two Interactive Software | Universal Music vs. Endeavour Mining Corp | Universal Music vs. Caledonia Mining |
| Global Net vs. Samsung Electronics Co | Global Net vs. Samsung Electronics Co | Global Net vs. Hyundai Motor | Global Net 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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