Correlation Between Metro Bank and Universal Music
Can any of the company-specific risk be diversified away by investing in both Metro Bank 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 Metro Bank and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Bank PLC and Universal Music Group, you can compare the effects of market volatilities on Metro Bank 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 Metro Bank with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and Universal Music.
Diversification Opportunities for Metro Bank and Universal Music
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metro and Universal is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank PLC 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 Metro Bank 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 Metro Bank PLC 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 Metro Bank i.e., Metro Bank and Universal Music go up and down completely randomly.
Pair Corralation between Metro Bank and Universal Music
Assuming the 90 days trading horizon Metro Bank is expected to generate 13.81 times less return on investment than Universal Music. In addition to that, Metro Bank is 1.71 times more volatile than Universal Music Group. It trades about 0.0 of its total potential returns per unit of risk. Universal Music Group is currently generating about 0.02 per unit of volatility. If you would invest 2,250 in Universal Music Group on October 11, 2024 and sell it today you would earn a total of 174.00 from holding Universal Music Group or generate 7.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Metro Bank PLC vs. Universal Music Group
Performance |
| Timeline |
| Metro Bank PLC |
| Universal Music Group |
Metro Bank and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Bank and Universal Music
The main advantage of trading using opposite Metro Bank and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Bank 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.| Metro Bank vs. JD Sports Fashion | Metro Bank vs. Molson Coors Beverage | Metro Bank vs. Verizon Communications | Metro Bank vs. Universal Display Corp |
| Universal Music vs. Bankers Investment Trust | Universal Music vs. Erste Group Bank | Universal Music vs. DFS Furniture PLC | Universal Music vs. Cembra Money Bank |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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