Correlation Between Universal Music and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both Universal Music and Lincoln Electric 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 Lincoln Electric 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 Lincoln Electric Holdings, you can compare the effects of market volatilities on Universal Music and Lincoln Electric 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 Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Lincoln Electric.
Diversification Opportunities for Universal Music and Lincoln Electric
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and Lincoln is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric 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 Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Universal Music i.e., Universal Music and Lincoln Electric go up and down completely randomly.
Pair Corralation between Universal Music and Lincoln Electric
Assuming the 90 days horizon Universal Music Group is expected to under-perform the Lincoln Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, Universal Music Group is 1.25 times less risky than Lincoln Electric. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Lincoln Electric Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 19,726 in Lincoln Electric Holdings on August 31, 2024 and sell it today you would earn a total of 1,936 from holding Lincoln Electric Holdings or generate 9.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Lincoln Electric Holdings
Performance |
| Timeline |
| Universal Music Group |
| Lincoln Electric Holdings |
Universal Music and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Lincoln Electric
The main advantage of trading using opposite Universal Music and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Lincoln Electric 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 Lincoln Electric will offset losses from the drop in Lincoln Electric's long position.| Universal Music vs. ZoomerMedia Limited | Universal Music vs. Network Media Group | Universal Music vs. New Wave Holdings |
| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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