Correlation Between Universal Music and G5 Entertainment
Can any of the company-specific risk be diversified away by investing in both Universal Music and G5 Entertainment 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 G5 Entertainment 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 G5 Entertainment AB, you can compare the effects of market volatilities on Universal Music and G5 Entertainment 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 G5 Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and G5 Entertainment.
Diversification Opportunities for Universal Music and G5 Entertainment
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and 0QUS is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and G5 Entertainment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G5 Entertainment 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 G5 Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G5 Entertainment has no effect on the direction of Universal Music i.e., Universal Music and G5 Entertainment go up and down completely randomly.
Pair Corralation between Universal Music and G5 Entertainment
Assuming the 90 days trading horizon Universal Music Group is expected to under-perform the G5 Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Universal Music Group is 3.03 times less risky than G5 Entertainment. The stock trades about -0.19 of its potential returns per unit of risk. The G5 Entertainment AB is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 9,090 in G5 Entertainment AB on September 2, 2024 and sell it today you would earn a total of 1,030 from holding G5 Entertainment AB or generate 11.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. G5 Entertainment AB
Performance |
| Timeline |
| Universal Music Group |
| G5 Entertainment |
Universal Music and G5 Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and G5 Entertainment
The main advantage of trading using opposite Universal Music and G5 Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, G5 Entertainment 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 G5 Entertainment will offset losses from the drop in G5 Entertainment's long position.| Universal Music vs. Uniper SE | Universal Music vs. Mulberry Group PLC | Universal Music vs. London Security Plc | Universal Music vs. Triad Group PLC |
| G5 Entertainment vs. Uniper SE | G5 Entertainment vs. Mulberry Group PLC | G5 Entertainment vs. London Security Plc | G5 Entertainment vs. Triad Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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