Correlation Between Universal Music and Este Lauder
Can any of the company-specific risk be diversified away by investing in both Universal Music and Este Lauder 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 Este Lauder 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 The Este Lauder, you can compare the effects of market volatilities on Universal Music and Este Lauder 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 Este Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Este Lauder.
Diversification Opportunities for Universal Music and Este Lauder
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Universal and Este is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder 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 Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of Universal Music i.e., Universal Music and Este Lauder go up and down completely randomly.
Pair Corralation between Universal Music and Este Lauder
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.31 times more return on investment than Este Lauder. However, Universal Music Group is 3.23 times less risky than Este Lauder. It trades about -0.12 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.25 per unit of risk. If you would invest 2,369 in Universal Music Group on August 23, 2024 and sell it today you would lose (104.00) from holding Universal Music Group or give up 4.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Universal Music Group vs. The Este Lauder
Performance |
| Timeline |
| Universal Music Group |
| Este Lauder |
Universal Music and Este Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Este Lauder
The main advantage of trading using opposite Universal Music and Este Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Este Lauder 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 Este Lauder will offset losses from the drop in Este Lauder's long position.| Universal Music vs. Merck Company | Universal Music vs. Unilever PLC | Universal Music vs. Anheuser Busch InBev SANV | Universal Music vs. The Este Lauder |
| Este Lauder vs. UNIQA Insurance Group | Este Lauder vs. CNH Industrial NV | Este Lauder vs. Erste Group Bank | Este Lauder vs. Universal Music Group |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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