Correlation Between Universal Music and Pershing Square
Can any of the company-specific risk be diversified away by investing in both Universal Music and Pershing Square 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 Pershing Square 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 Pershing Square Holdings, you can compare the effects of market volatilities on Universal Music and Pershing Square 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 Pershing Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Pershing Square.
Diversification Opportunities for Universal Music and Pershing Square
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Universal and Pershing is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Universal Music i.e., Universal Music and Pershing Square go up and down completely randomly.
Pair Corralation between Universal Music and Pershing Square
Assuming the 90 days trading horizon Universal Music Group is expected to under-perform the Pershing Square. In addition to that, Universal Music is 1.23 times more volatile than Pershing Square Holdings. It trades about -0.12 of its total potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.08 per unit of volatility. If you would invest 4,585 in Pershing Square Holdings on August 30, 2024 and sell it today you would earn a total of 94.00 from holding Pershing Square Holdings or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Pershing Square Holdings
Performance |
| Timeline |
| Universal Music Group |
| Pershing Square Holdings |
Universal Music and Pershing Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Pershing Square
The main advantage of trading using opposite Universal Music and Pershing Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Pershing Square 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 Pershing Square will offset losses from the drop in Pershing Square's long position.| Universal Music vs. Vivendi SA | Universal Music vs. Prosus NV | Universal Music vs. Pershing Square Holdings | Universal Music vs. Adyen NV |
| Pershing Square vs. Apple Inc | Pershing Square vs. Microsoft | Pershing Square vs. Alphabet Inc Class C | Pershing Square vs. Meta Platforms |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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