Correlation Between Universal Music and Eclectic Bar
Can any of the company-specific risk be diversified away by investing in both Universal Music and Eclectic Bar 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 Eclectic Bar 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 Eclectic Bar Group, you can compare the effects of market volatilities on Universal Music and Eclectic Bar 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 Eclectic Bar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Eclectic Bar.
Diversification Opportunities for Universal Music and Eclectic Bar
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Eclectic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Eclectic Bar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclectic Bar Group 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 Eclectic Bar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclectic Bar Group has no effect on the direction of Universal Music i.e., Universal Music and Eclectic Bar go up and down completely randomly.
Pair Corralation between Universal Music and Eclectic Bar
Assuming the 90 days trading horizon Universal Music Group is expected to generate 29.29 times more return on investment than Eclectic Bar. However, Universal Music is 29.29 times more volatile than Eclectic Bar Group. It trades about 0.39 of its potential returns per unit of risk. Eclectic Bar Group is currently generating about 0.21 per unit of risk. If you would invest 2,422 in Universal Music Group on November 7, 2024 and sell it today you would earn a total of 287.00 from holding Universal Music Group or generate 11.85% 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. Eclectic Bar Group
Performance |
| Timeline |
| Universal Music Group |
| Eclectic Bar Group |
Universal Music and Eclectic Bar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Eclectic Bar
The main advantage of trading using opposite Universal Music and Eclectic Bar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Eclectic Bar 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 Eclectic Bar will offset losses from the drop in Eclectic Bar's long position.| Universal Music vs. Software Circle plc | Universal Music vs. G5 Entertainment AB | Universal Music vs. Compal Electronics GDR | Universal Music vs. Arrow Electronics |
| Eclectic Bar vs. Bank of Ireland | Eclectic Bar vs. Nordea Bank Abp | Eclectic Bar vs. St Galler Kantonalbank | Eclectic Bar vs. Tatton Asset Management |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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