Correlation Between JD and Universal Music
Can any of the company-specific risk be diversified away by investing in both JD 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 JD and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Inc and Universal Music Group, you can compare the effects of market volatilities on JD 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 JD with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Universal Music.
Diversification Opportunities for JD and Universal Music
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between JD and Universal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc 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 JD 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 JD Inc 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 JD i.e., JD and Universal Music go up and down completely randomly.
Pair Corralation between JD and Universal Music
Assuming the 90 days horizon JD Inc is expected to under-perform the Universal Music. In addition to that, JD is 1.64 times more volatile than Universal Music Group. It trades about -0.29 of its total potential returns per unit of risk. Universal Music Group is currently generating about -0.17 per unit of volatility. If you would invest 2,388 in Universal Music Group on August 28, 2024 and sell it today you would lose (134.00) from holding Universal Music Group or give up 5.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc vs. Universal Music Group
Performance |
| Timeline |
| JD Inc |
| Universal Music Group |
JD and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Universal Music
The main advantage of trading using opposite JD and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD 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.| JD vs. Oberbank AG | JD vs. RATH Aktiengesellschaft | JD vs. Semperit Aktiengesellschaft Holding | JD vs. Telekom Austria AG |
| Universal Music vs. SBM Offshore NV | Universal Music vs. Vienna Insurance Group | Universal Music vs. Addiko Bank AG | Universal Music vs. AMAG Austria Metall |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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