Correlation Between Universal Music and Sparebank
Can any of the company-specific risk be diversified away by investing in both Universal Music and Sparebank 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 Sparebank 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 Sparebank 1 SR, you can compare the effects of market volatilities on Universal Music and Sparebank 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 Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Sparebank.
Diversification Opportunities for Universal Music and Sparebank
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Universal and Sparebank is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR 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 Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SR has no effect on the direction of Universal Music i.e., Universal Music and Sparebank go up and down completely randomly.
Pair Corralation between Universal Music and Sparebank
Assuming the 90 days trading horizon Universal Music is expected to generate 1.86 times less return on investment than Sparebank. In addition to that, Universal Music is 1.57 times more volatile than Sparebank 1 SR. It trades about 0.02 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.05 per unit of volatility. If you would invest 10,683 in Sparebank 1 SR on September 14, 2024 and sell it today you would earn a total of 3,857 from holding Sparebank 1 SR or generate 36.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.61% |
| Values | Daily Returns |
Universal Music Group vs. Sparebank 1 SR
Performance |
| Timeline |
| Universal Music Group |
| Sparebank 1 SR |
Universal Music and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Sparebank
The main advantage of trading using opposite Universal Music and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank'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 |
| Sparebank vs. Porvair plc | Sparebank vs. GreenX Metals | Sparebank vs. Morgan Advanced Materials | Sparebank vs. Metals Exploration 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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