Correlation Between Oatly Group and Universal Music
Can any of the company-specific risk be diversified away by investing in both Oatly Group 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 Oatly Group and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oatly Group AB and Universal Music Group, you can compare the effects of market volatilities on Oatly Group 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 Oatly Group with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oatly Group and Universal Music.
Diversification Opportunities for Oatly Group and Universal Music
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oatly and Universal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB 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 Oatly Group 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 Oatly Group AB 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 Oatly Group i.e., Oatly Group and Universal Music go up and down completely randomly.
Pair Corralation between Oatly Group and Universal Music
Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the Universal Music. In addition to that, Oatly Group is 2.41 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 2,224 in Universal Music Group on August 27, 2024 and sell it today you would earn a total of 166.00 from holding Universal Music Group or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oatly Group AB vs. Universal Music Group
Performance |
| Timeline |
| Oatly Group AB |
| Universal Music Group |
Oatly Group and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oatly Group and Universal Music
The main advantage of trading using opposite Oatly Group and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oatly Group 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.| Oatly Group vs. Bellring Brands LLC | Oatly Group vs. Ingredion Incorporated | Oatly Group vs. Nomad Foods | Oatly Group vs. Post Holdings |
| Universal Music vs. Thunderbird Entertainment Group | Universal Music vs. Warner Music Group | Universal Music vs. Live Nation Entertainment | Universal Music vs. Atlanta Braves Holdings, |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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