Correlation Between Liberty Media and Universal Music
Can any of the company-specific risk be diversified away by investing in both Liberty Media 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 Liberty Media and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media and Universal Music Group, you can compare the effects of market volatilities on Liberty Media 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 Liberty Media with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Universal Music.
Diversification Opportunities for Liberty Media and Universal Music
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Liberty and Universal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media 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 Liberty Media 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 Liberty Media 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 Liberty Media i.e., Liberty Media and Universal Music go up and down completely randomly.
Pair Corralation between Liberty Media and Universal Music
Assuming the 90 days horizon Liberty Media is expected to generate 2.57 times less return on investment than Universal Music. But when comparing it to its historical volatility, Liberty Media is 1.69 times less risky than Universal Music. It trades about 0.23 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,231 in Universal Music Group on November 4, 2024 and sell it today you would earn a total of 167.00 from holding Universal Music Group or generate 13.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Media vs. Universal Music Group
Performance |
| Timeline |
| Liberty Media |
| Universal Music Group |
Liberty Media and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Media and Universal Music
The main advantage of trading using opposite Liberty Media and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media 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.| Liberty Media vs. Atlanta Braves Holdings, | Liberty Media vs. Madison Square Garden | Liberty Media vs. News Corp B | Liberty Media vs. News Corp A |
| Universal Music vs. New Wave Holdings | Universal Music vs. Guild Esports Plc | Universal Music vs. Celtic plc | Universal Music vs. OverActive Media Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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