Correlation Between Unilever PLC and Universal Music
Can any of the company-specific risk be diversified away by investing in both Unilever PLC 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 Unilever PLC and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever PLC and Universal Music Group, you can compare the effects of market volatilities on Unilever PLC 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 Unilever PLC with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Universal Music.
Diversification Opportunities for Unilever PLC and Universal Music
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Unilever and Universal is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Unilever 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 Unilever PLC 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 Unilever 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 Unilever PLC i.e., Unilever PLC and Universal Music go up and down completely randomly.
Pair Corralation between Unilever PLC and Universal Music
Assuming the 90 days trading horizon Unilever PLC is expected to generate 0.57 times more return on investment than Universal Music. However, Unilever PLC is 1.77 times less risky than Universal Music. It trades about -0.17 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.13 per unit of risk. If you would invest 5,716 in Unilever PLC on August 26, 2024 and sell it today you would lose (184.00) from holding Unilever PLC or give up 3.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC vs. Universal Music Group
Performance |
| Timeline |
| Unilever PLC |
| Universal Music Group |
Unilever PLC and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Universal Music
The main advantage of trading using opposite Unilever PLC and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC 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.| Unilever PLC vs. Universal Music Group | Unilever PLC vs. SBM Offshore NV | Unilever PLC vs. Addiko Bank AG | Unilever PLC vs. UNIQA Insurance Group |
| Universal Music vs. AMAG Austria Metall | Universal Music vs. Erste Group Bank | Universal Music vs. Wiener Privatbank SE | Universal Music vs. Oberbank AG |
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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