Correlation Between Universal Music and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Universal Music and Cincinnati Financial 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 Cincinnati Financial 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 Cincinnati Financial, you can compare the effects of market volatilities on Universal Music and Cincinnati Financial 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 Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Cincinnati Financial.
Diversification Opportunities for Universal Music and Cincinnati Financial
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Universal and Cincinnati is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial 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 Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of Universal Music i.e., Universal Music and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Universal Music and Cincinnati Financial
Assuming the 90 days horizon Universal Music Group is expected to under-perform the Cincinnati Financial. In addition to that, Universal Music is 1.14 times more volatile than Cincinnati Financial. It trades about -0.13 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.35 per unit of volatility. If you would invest 14,065 in Cincinnati Financial on September 2, 2024 and sell it today you would earn a total of 1,918 from holding Cincinnati Financial or generate 13.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Cincinnati Financial
Performance |
| Timeline |
| Universal Music Group |
| Cincinnati Financial |
Universal Music and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Cincinnati Financial
The main advantage of trading using opposite Universal Music and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| Universal Music vs. Thunderbird Entertainment Group | Universal Music vs. Warner Music Group | Universal Music vs. Live Nation Entertainment | Universal Music vs. Atlanta Braves Holdings, |
| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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