Correlation Between Korea Electric and Universal Music
Can any of the company-specific risk be diversified away by investing in both Korea Electric 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 Korea Electric and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Electric Power and Universal Music Group, you can compare the effects of market volatilities on Korea Electric 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 Korea Electric with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Electric and Universal Music.
Diversification Opportunities for Korea Electric and Universal Music
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Korea and Universal is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power 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 Korea Electric 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 Korea Electric Power 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 Korea Electric i.e., Korea Electric and Universal Music go up and down completely randomly.
Pair Corralation between Korea Electric and Universal Music
Considering the 90-day investment horizon Korea Electric Power is expected to generate 1.8 times more return on investment than Universal Music. However, Korea Electric is 1.8 times more volatile than Universal Music Group. It trades about 0.08 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.04 per unit of risk. If you would invest 717.00 in Korea Electric Power on October 24, 2024 and sell it today you would earn a total of 16.50 from holding Korea Electric Power or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Korea Electric Power vs. Universal Music Group
Performance |
| Timeline |
| Korea Electric Power |
| Universal Music Group |
Korea Electric and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Electric and Universal Music
The main advantage of trading using opposite Korea Electric and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Electric 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.| Korea Electric vs. Enel Chile SA | Korea Electric vs. Centrais Eltricas Brasileiras | Korea Electric vs. Central Puerto SA | Korea Electric vs. CMS Energy |
| Universal Music vs. Universal Media Group | Universal Music vs. Bollor SE | Universal Music vs. Reading International | Universal Music vs. Warner Music Group |
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 Stocks Directory module to find actively traded stocks across global markets.
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