Correlation Between Universal Music and Walmart
Can any of the company-specific risk be diversified away by investing in both Universal Music and Walmart 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 Walmart 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 Walmart, you can compare the effects of market volatilities on Universal Music and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Walmart.
Diversification Opportunities for Universal Music and Walmart
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and Walmart is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Universal Music i.e., Universal Music and Walmart go up and down completely randomly.
Pair Corralation between Universal Music and Walmart
Assuming the 90 days trading horizon Universal Music is expected to generate 3.8 times less return on investment than Walmart. But when comparing it to its historical volatility, Universal Music Group is 4.56 times less risky than Walmart. It trades about 0.04 of its potential returns per unit of risk. Walmart is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,328 in Walmart on December 1, 2024 and sell it today you would earn a total of 1,632 from holding Walmart or generate 37.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Universal Music Group vs. Walmart
Performance |
| Timeline |
| Universal Music Group |
| Walmart |
Universal Music and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Walmart
The main advantage of trading using opposite Universal Music and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| Universal Music vs. Sunny Optical Technology | Universal Music vs. China Pacific Insurance | Universal Music vs. Axway Software SA | Universal Music vs. Allianz Technology Trust |
| Walmart vs. Bisichi Mining PLC | Walmart vs. Coeur Mining | Walmart vs. Monster Beverage Corp | Walmart vs. Ebro Foods |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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