Correlation Between Universal Music and Vanguard
Can any of the company-specific risk be diversified away by investing in both Universal Music and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on Universal Music and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Vanguard.
Diversification Opportunities for Universal Music and Vanguard
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Universal and Vanguard is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Universal Music i.e., Universal Music and Vanguard go up and down completely randomly.
Pair Corralation between Universal Music and Vanguard
Assuming the 90 days trading horizon Universal Music Group is expected to under-perform the Vanguard. In addition to that, Universal Music is 1.22 times more volatile than Vanguard SP 500. It trades about -0.12 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.21 per unit of volatility. If you would invest 10,236 in Vanguard SP 500 on August 30, 2024 and sell it today you would earn a total of 589.00 from holding Vanguard SP 500 or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Vanguard SP 500
Performance |
| Timeline |
| Universal Music Group |
| Vanguard SP 500 |
Universal Music and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Vanguard
The main advantage of trading using opposite Universal Music and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| Universal Music vs. Vivendi SA | Universal Music vs. Prosus NV | Universal Music vs. Pershing Square Holdings | Universal Music vs. Adyen NV |
| Vanguard vs. Vanguard FTSE All World | Vanguard vs. iShares Core MSCI | Vanguard vs. Vanguard FTSE All World | Vanguard vs. Vanguard FTSE Emerging |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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