Correlation Between Universal Music and Hudson Technologies
Can any of the company-specific risk be diversified away by investing in both Universal Music and Hudson Technologies 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 Hudson Technologies 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 Hudson Technologies, you can compare the effects of market volatilities on Universal Music and Hudson Technologies 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 Hudson Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Hudson Technologies.
Diversification Opportunities for Universal Music and Hudson Technologies
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Hudson is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Hudson Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Technologies 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 Hudson Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Technologies has no effect on the direction of Universal Music i.e., Universal Music and Hudson Technologies go up and down completely randomly.
Pair Corralation between Universal Music and Hudson Technologies
Assuming the 90 days horizon Universal Music Group is expected to generate 0.72 times more return on investment than Hudson Technologies. However, Universal Music Group is 1.39 times less risky than Hudson Technologies. It trades about 0.02 of its potential returns per unit of risk. Hudson Technologies is currently generating about -0.03 per unit of risk. If you would invest 2,267 in Universal Music Group on August 24, 2024 and sell it today you would earn a total of 123.00 from holding Universal Music Group or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Hudson Technologies
Performance |
| Timeline |
| Universal Music Group |
| Hudson Technologies |
Universal Music and Hudson Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Hudson Technologies
The main advantage of trading using opposite Universal Music and Hudson Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Hudson Technologies 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 Hudson Technologies will offset losses from the drop in Hudson Technologies' 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, |
| Hudson Technologies vs. Sensient Technologies | Hudson Technologies vs. Innospec | Hudson Technologies vs. H B Fuller | Hudson Technologies vs. Quaker Chemical |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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