Correlation Between BHP Group and Universal Music
Can any of the company-specific risk be diversified away by investing in both BHP Group 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 BHP Group and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group Limited and Universal Music Group, you can compare the effects of market volatilities on BHP Group 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 BHP Group with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Universal Music.
Diversification Opportunities for BHP Group and Universal Music
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BHP and Universal is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited 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 BHP Group 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 BHP Group Limited 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 BHP Group i.e., BHP Group and Universal Music go up and down completely randomly.
Pair Corralation between BHP Group and Universal Music
Assuming the 90 days trading horizon BHP Group is expected to generate 2.59 times less return on investment than Universal Music. In addition to that, BHP Group is 1.15 times more volatile than Universal Music Group. It trades about 0.07 of its total potential returns per unit of risk. Universal Music Group is currently generating about 0.2 per unit of volatility. If you would invest 2,302 in Universal Music Group on September 13, 2024 and sell it today you would earn a total of 113.00 from holding Universal Music Group or generate 4.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Universal Music Group
Performance |
| Timeline |
| BHP Group Limited |
| Universal Music Group |
BHP Group and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Universal Music
The main advantage of trading using opposite BHP Group and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group 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.| BHP Group vs. Melia Hotels | BHP Group vs. GreenX Metals | BHP Group vs. AMG Advanced Metallurgical | BHP Group vs. Fevertree Drinks Plc |
| Universal Music vs. Hochschild Mining plc | Universal Music vs. Sparebank 1 SR | Universal Music vs. Prudential Financial | Universal Music vs. McEwen Mining |
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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