Correlation Between Universal Music and Overstock
Can any of the company-specific risk be diversified away by investing in both Universal Music and Overstock 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 Overstock 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 Overstock, you can compare the effects of market volatilities on Universal Music and Overstock 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 Overstock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Overstock.
Diversification Opportunities for Universal Music and Overstock
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Universal and Overstock is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock 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 Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of Universal Music i.e., Universal Music and Overstock go up and down completely randomly.
Pair Corralation between Universal Music and Overstock
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.43 times more return on investment than Overstock. However, Universal Music Group is 2.35 times less risky than Overstock. It trades about 0.03 of its potential returns per unit of risk. Overstock is currently generating about -0.03 per unit of risk. If you would invest 1,921 in Universal Music Group on August 30, 2024 and sell it today you would earn a total of 327.00 from holding Universal Music Group or generate 17.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.75% |
| Values | Daily Returns |
Universal Music Group vs. Overstock
Performance |
| Timeline |
| Universal Music Group |
| Overstock |
Universal Music and Overstock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Overstock
The main advantage of trading using opposite Universal Music and Overstock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Overstock 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 Overstock will offset losses from the drop in Overstock's long position.| Universal Music vs. Lendinvest PLC | Universal Music vs. Neometals | Universal Music vs. Albion Technology General | Universal Music vs. Jupiter Fund Management |
| Overstock vs. Aeorema Communications Plc | Overstock vs. Universal Display Corp | Overstock vs. Vitec Software Group | Overstock vs. Bytes Technology |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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