Correlation Between Universal Music and AFC Ajax
Can any of the company-specific risk be diversified away by investing in both Universal Music and AFC Ajax 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 Universal Music and AFC Ajax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Music Group and AFC Ajax NV, you can compare the effects of market volatilities on Universal Music and AFC Ajax 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 Universal Music with a short position of AFC Ajax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and AFC Ajax.
Diversification Opportunities for Universal Music and AFC Ajax
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and AFC is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and AFC Ajax NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Ajax NV and Universal Music 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 Universal Music Group are associated (or correlated) with AFC Ajax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Ajax NV has no effect on the direction of Universal Music i.e., Universal Music and AFC Ajax go up and down completely randomly.
Pair Corralation between Universal Music and AFC Ajax
Assuming the 90 days trading horizon Universal Music Group is expected to under-perform the AFC Ajax. In addition to that, Universal Music is 2.85 times more volatile than AFC Ajax NV. It trades about -0.05 of its total potential returns per unit of risk. AFC Ajax NV is currently generating about -0.02 per unit of volatility. If you would invest 1,040 in AFC Ajax NV on September 3, 2024 and sell it today you would lose (35.00) from holding AFC Ajax NV or give up 3.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. AFC Ajax NV
Performance |
| Timeline |
| Universal Music Group |
| AFC Ajax NV |
Universal Music and AFC Ajax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and AFC Ajax
The main advantage of trading using opposite Universal Music and AFC Ajax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, AFC Ajax 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 AFC Ajax will offset losses from the drop in AFC Ajax's long position.| Universal Music vs. Vivendi SA | Universal Music vs. Prosus NV | Universal Music vs. Pershing Square Holdings | Universal Music vs. Adyen NV |
| AFC Ajax vs. Adyen NV | AFC Ajax vs. ASML Holding NV | AFC Ajax vs. ASM International NV | AFC Ajax vs. IMCD NV |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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