Correlation Between Universal Music and X FAB
Can any of the company-specific risk be diversified away by investing in both Universal Music and X FAB 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 X FAB 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on Universal Music and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and X FAB.
Diversification Opportunities for Universal Music and X FAB
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and 0ROZ is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Universal Music i.e., Universal Music and X FAB go up and down completely randomly.
Pair Corralation between Universal Music and X FAB
Assuming the 90 days trading horizon Universal Music is expected to generate 5.68 times less return on investment than X FAB. But when comparing it to its historical volatility, Universal Music Group is 14.21 times less risky than X FAB. It trades about 0.22 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 459.00 in X FAB Silicon Foundries on September 13, 2024 and sell it today you would earn a total of 34.00 from holding X FAB Silicon Foundries or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Universal Music Group |
| X FAB Silicon |
Universal Music and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and X FAB
The main advantage of trading using opposite Universal Music and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB'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 |
| X FAB vs. Samsung Electronics Co | X FAB vs. Samsung Electronics Co | X FAB vs. Hyundai Motor | X FAB vs. Reliance Industries Ltd |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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