Correlation Between Universal Music and Alien Metals
Can any of the company-specific risk be diversified away by investing in both Universal Music and Alien Metals 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 Alien Metals 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 Alien Metals, you can compare the effects of market volatilities on Universal Music and Alien Metals 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 Alien Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Alien Metals.
Diversification Opportunities for Universal Music and Alien Metals
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and Alien is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals 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 Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Universal Music i.e., Universal Music and Alien Metals go up and down completely randomly.
Pair Corralation between Universal Music and Alien Metals
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.34 times more return on investment than Alien Metals. However, Universal Music Group is 2.93 times less risky than Alien Metals. It trades about 0.35 of its potential returns per unit of risk. Alien Metals is currently generating about -0.2 per unit of risk. If you would invest 2,426 in Universal Music Group on November 2, 2024 and sell it today you would earn a total of 260.00 from holding Universal Music Group or generate 10.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Alien Metals
Performance |
| Timeline |
| Universal Music Group |
| Alien Metals |
Universal Music and Alien Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Alien Metals
The main advantage of trading using opposite Universal Music and Alien Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Alien Metals 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 Alien Metals will offset losses from the drop in Alien Metals' long position.| Universal Music vs. Travel Leisure Co | Universal Music vs. DFS Furniture PLC | Universal Music vs. Solstad Offshore ASA | Universal Music vs. Molson Coors Beverage |
| Alien Metals vs. Taiwan Semiconductor Manufacturing | Alien Metals vs. Sabien Technology Group | Alien Metals vs. Nordic Semiconductor ASA | Alien Metals vs. Verizon Communications |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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