Correlation Between UNIVERSAL MUSIC and InterContinental
Can any of the company-specific risk be diversified away by investing in both UNIVERSAL MUSIC and InterContinental 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 InterContinental 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 InterContinental Hotels Group, you can compare the effects of market volatilities on UNIVERSAL MUSIC and InterContinental 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 InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNIVERSAL MUSIC and InterContinental.
Diversification Opportunities for UNIVERSAL MUSIC and InterContinental
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UNIVERSAL and InterContinental is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and InterContinental go up and down completely randomly.
Pair Corralation between UNIVERSAL MUSIC and InterContinental
Assuming the 90 days horizon UNIVERSAL MUSIC is expected to generate 1.26 times less return on investment than InterContinental. In addition to that, UNIVERSAL MUSIC is 1.2 times more volatile than InterContinental Hotels Group. It trades about 0.04 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.06 per unit of volatility. If you would invest 6,053 in InterContinental Hotels Group on January 26, 2025 and sell it today you would earn a total of 3,147 from holding InterContinental Hotels Group or generate 51.99% 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. InterContinental Hotels Group
Performance |
| Timeline |
| UNIVERSAL MUSIC GROUP |
| InterContinental Hotels |
UNIVERSAL MUSIC and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNIVERSAL MUSIC and InterContinental
The main advantage of trading using opposite UNIVERSAL MUSIC and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNIVERSAL MUSIC position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.| UNIVERSAL MUSIC vs. DALATA HOTEL | UNIVERSAL MUSIC vs. Xinhua Winshare Publishing | UNIVERSAL MUSIC vs. NH HOTEL GROUP | UNIVERSAL MUSIC vs. Strategic Education |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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