Correlation Between Apple and UNIVERSAL MUSIC
Can any of the company-specific risk be diversified away by investing in both Apple and UNIVERSAL MUSIC 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 Apple and UNIVERSAL MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and UNIVERSAL MUSIC GROUP, you can compare the effects of market volatilities on Apple and UNIVERSAL MUSIC 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 Apple with a short position of UNIVERSAL MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and UNIVERSAL MUSIC.
Diversification Opportunities for Apple and UNIVERSAL MUSIC
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Apple and UNIVERSAL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and UNIVERSAL MUSIC GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL MUSIC GROUP and Apple 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 Apple Inc are associated (or correlated) with UNIVERSAL MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL MUSIC GROUP has no effect on the direction of Apple i.e., Apple and UNIVERSAL MUSIC go up and down completely randomly.
Pair Corralation between Apple and UNIVERSAL MUSIC
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.78 times more return on investment than UNIVERSAL MUSIC. However, Apple Inc is 1.29 times less risky than UNIVERSAL MUSIC. It trades about 0.17 of its potential returns per unit of risk. UNIVERSAL MUSIC GROUP is currently generating about -0.01 per unit of risk. If you would invest 15,535 in Apple Inc on September 18, 2024 and sell it today you would earn a total of 8,565 from holding Apple Inc or generate 55.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. UNIVERSAL MUSIC GROUP
Performance |
| Timeline |
| Apple Inc |
| UNIVERSAL MUSIC GROUP |
Apple and UNIVERSAL MUSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and UNIVERSAL MUSIC
The main advantage of trading using opposite Apple and UNIVERSAL MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, UNIVERSAL MUSIC 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 UNIVERSAL MUSIC will offset losses from the drop in UNIVERSAL MUSIC's long position.The idea behind Apple Inc and UNIVERSAL MUSIC GROUP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| UNIVERSAL MUSIC vs. Apple Inc | UNIVERSAL MUSIC vs. Apple Inc | UNIVERSAL MUSIC vs. Apple Inc | UNIVERSAL MUSIC vs. Apple Inc |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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