Correlation Between Universal Music and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Universal Music and Nasdaq 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 Nasdaq 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 Nasdaq Inc, you can compare the effects of market volatilities on Universal Music and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Nasdaq.
Diversification Opportunities for Universal Music and Nasdaq
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Universal and Nasdaq is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Universal Music i.e., Universal Music and Nasdaq go up and down completely randomly.
Pair Corralation between Universal Music and Nasdaq
Assuming the 90 days horizon Universal Music is expected to generate 1.46 times less return on investment than Nasdaq. In addition to that, Universal Music is 1.57 times more volatile than Nasdaq Inc. It trades about 0.02 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.04 per unit of volatility. If you would invest 6,602 in Nasdaq Inc on August 24, 2024 and sell it today you would earn a total of 1,505 from holding Nasdaq Inc or generate 22.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Nasdaq Inc
Performance |
| Timeline |
| Universal Music Group |
| Nasdaq Inc |
Universal Music and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Nasdaq
The main advantage of trading using opposite Universal Music and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq'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, |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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