Correlation Between Universal Music and SM Energy
Can any of the company-specific risk be diversified away by investing in both Universal Music and SM Energy 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 SM Energy 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 SM Energy Co, you can compare the effects of market volatilities on Universal Music and SM Energy 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 SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and SM Energy.
Diversification Opportunities for Universal Music and SM Energy
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and 0KZA is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy 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 SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of Universal Music i.e., Universal Music and SM Energy go up and down completely randomly.
Pair Corralation between Universal Music and SM Energy
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.98 times more return on investment than SM Energy. However, Universal Music Group is 1.02 times less risky than SM Energy. It trades about 0.03 of its potential returns per unit of risk. SM Energy Co is currently generating about 0.02 per unit of risk. If you would invest 2,315 in Universal Music Group on November 6, 2024 and sell it today you would earn a total of 384.00 from holding Universal Music Group or generate 16.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Universal Music Group vs. SM Energy Co
Performance |
| Timeline |
| Universal Music Group |
| SM Energy |
Universal Music and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and SM Energy
The main advantage of trading using opposite Universal Music and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, SM Energy 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 SM Energy will offset losses from the drop in SM Energy's long position.| Universal Music vs. Broadridge Financial Solutions | Universal Music vs. Finnair Oyj | Universal Music vs. Norman Broadbent Plc | Universal Music vs. Lindsell Train Investment |
| SM Energy vs. Edita Food Industries | SM Energy vs. mobilezone holding AG | SM Energy vs. Bell Food Group | SM Energy vs. Zegona Communications Plc |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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