Correlation Between Universal Music and Thor Mining
Can any of the company-specific risk be diversified away by investing in both Universal Music and Thor Mining 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 Thor Mining 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 Thor Mining PLC, you can compare the effects of market volatilities on Universal Music and Thor Mining 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 Thor Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Thor Mining.
Diversification Opportunities for Universal Music and Thor Mining
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Thor is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Thor Mining PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Mining PLC 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 Thor Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Mining PLC has no effect on the direction of Universal Music i.e., Universal Music and Thor Mining go up and down completely randomly.
Pair Corralation between Universal Music and Thor Mining
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.36 times more return on investment than Thor Mining. However, Universal Music Group is 2.79 times less risky than Thor Mining. It trades about -0.16 of its potential returns per unit of risk. Thor Mining PLC is currently generating about -0.14 per unit of risk. If you would invest 2,357 in Universal Music Group on August 26, 2024 and sell it today you would lose (110.00) from holding Universal Music Group or give up 4.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Thor Mining PLC
Performance |
| Timeline |
| Universal Music Group |
| Thor Mining PLC |
Universal Music and Thor Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Thor Mining
The main advantage of trading using opposite Universal Music and Thor Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Thor Mining 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 Thor Mining will offset losses from the drop in Thor Mining's long position.| Universal Music vs. Aberdeen Diversified Income | Universal Music vs. Diversified Energy | Universal Music vs. Eastinco Mining Exploration | Universal Music vs. Hochschild Mining plc |
| Thor Mining vs. United Utilities Group | Thor Mining vs. Central Asia Metals | Thor Mining vs. Golden Metal Resources | Thor Mining vs. Science in Sport |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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