Correlation Between Columbia Sportswear and UNIVERSAL MUSIC

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Can any of the company-specific risk be diversified away by investing in both Columbia Sportswear 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 Columbia Sportswear and UNIVERSAL MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Sportswear and UNIVERSAL MUSIC GROUP, you can compare the effects of market volatilities on Columbia Sportswear 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 Columbia Sportswear with a short position of UNIVERSAL MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Sportswear and UNIVERSAL MUSIC.

Diversification Opportunities for Columbia Sportswear and UNIVERSAL MUSIC

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Columbia and UNIVERSAL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear i.e., Columbia Sportswear and UNIVERSAL MUSIC go up and down completely randomly.

Pair Corralation between Columbia Sportswear and UNIVERSAL MUSIC

Assuming the 90 days horizon Columbia Sportswear is expected to under-perform the UNIVERSAL MUSIC. But the stock apears to be less risky and, when comparing its historical volatility, Columbia Sportswear is 1.33 times less risky than UNIVERSAL MUSIC. The stock trades about -0.41 of its potential returns per unit of risk. The UNIVERSAL MUSIC GROUP is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,334  in UNIVERSAL MUSIC GROUP on October 11, 2024 and sell it today you would earn a total of  106.00  from holding UNIVERSAL MUSIC GROUP or generate 4.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Columbia Sportswear  vs.  UNIVERSAL MUSIC GROUP

 Performance 
       Timeline  
Columbia Sportswear 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Columbia Sportswear reported solid returns over the last few months and may actually be approaching a breakup point.
UNIVERSAL MUSIC GROUP 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL MUSIC GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, UNIVERSAL MUSIC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Columbia Sportswear and UNIVERSAL MUSIC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Columbia Sportswear and UNIVERSAL MUSIC

The main advantage of trading using opposite Columbia Sportswear and UNIVERSAL MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Sportswear 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 Columbia Sportswear 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.
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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