Correlation Between Cars and Universal Media
Can any of the company-specific risk be diversified away by investing in both Cars and Universal Media 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 Cars and Universal Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Universal Media Group, you can compare the effects of market volatilities on Cars and Universal Media 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 Cars with a short position of Universal Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Universal Media.
Diversification Opportunities for Cars and Universal Media
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cars and Universal is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Universal Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Media Group and Cars 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 Cars Inc are associated (or correlated) with Universal Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Media Group has no effect on the direction of Cars i.e., Cars and Universal Media go up and down completely randomly.
Pair Corralation between Cars and Universal Media
Given the investment horizon of 90 days Cars is expected to generate 1.02 times less return on investment than Universal Media. But when comparing it to its historical volatility, Cars Inc is 6.18 times less risky than Universal Media. It trades about 0.02 of its potential returns per unit of risk. Universal Media Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 28.00 in Universal Media Group on August 31, 2024 and sell it today you would lose (24.30) from holding Universal Media Group or give up 86.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Universal Media Group
Performance |
| Timeline |
| Cars Inc |
| Universal Media Group |
Cars and Universal Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Universal Media
The main advantage of trading using opposite Cars and Universal Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Universal Media 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 Media will offset losses from the drop in Universal Media's long position.The idea behind Cars Inc and Universal Media 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 Media vs. Cars Inc | Universal Media vs. FormFactor | Universal Media vs. Playtika Holding Corp | Universal Media vs. Mind Technology |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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