Correlation Between Avon Protection and Universal Music
Can any of the company-specific risk be diversified away by investing in both Avon Protection 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 Avon Protection and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avon Protection PLC and Universal Music Group, you can compare the effects of market volatilities on Avon Protection 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 Avon Protection with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avon Protection and Universal Music.
Diversification Opportunities for Avon Protection and Universal Music
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Avon and Universal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Avon Protection PLC 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 Avon Protection 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 Avon Protection PLC 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 Avon Protection i.e., Avon Protection and Universal Music go up and down completely randomly.
Pair Corralation between Avon Protection and Universal Music
Assuming the 90 days trading horizon Avon Protection PLC is expected to generate 2.22 times more return on investment than Universal Music. However, Avon Protection is 2.22 times more volatile than Universal Music Group. It trades about 0.25 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.19 per unit of risk. If you would invest 125,800 in Avon Protection PLC on September 2, 2024 and sell it today you would earn a total of 15,400 from holding Avon Protection PLC or generate 12.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avon Protection PLC vs. Universal Music Group
Performance |
| Timeline |
| Avon Protection PLC |
| Universal Music Group |
Avon Protection and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avon Protection and Universal Music
The main advantage of trading using opposite Avon Protection and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avon Protection 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.| Avon Protection vs. Alfa Financial Software | Avon Protection vs. Associated British Foods | Avon Protection vs. Supermarket Income REIT | Avon Protection vs. Southern Copper Corp |
| Universal Music vs. Uniper SE | Universal Music vs. Mulberry Group PLC | Universal Music vs. London Security Plc | Universal Music vs. Triad Group PLC |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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