Correlation Between Universal Music and Victorias Secret
Can any of the company-specific risk be diversified away by investing in both Universal Music and Victorias Secret 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 Victorias Secret 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 Victorias Secret Co, you can compare the effects of market volatilities on Universal Music and Victorias Secret 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 Victorias Secret. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Victorias Secret.
Diversification Opportunities for Universal Music and Victorias Secret
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Universal and Victorias is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret 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 Victorias Secret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victorias Secret has no effect on the direction of Universal Music i.e., Universal Music and Victorias Secret go up and down completely randomly.
Pair Corralation between Universal Music and Victorias Secret
Assuming the 90 days horizon Universal Music Group is expected to generate 0.88 times more return on investment than Victorias Secret. However, Universal Music Group is 1.14 times less risky than Victorias Secret. It trades about 0.04 of its potential returns per unit of risk. Victorias Secret Co is currently generating about -0.65 per unit of risk. If you would invest 2,804 in Universal Music Group on December 1, 2024 and sell it today you would earn a total of 31.00 from holding Universal Music Group or generate 1.11% 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. Victorias Secret Co
Performance |
| Timeline |
| Universal Music Group |
| Victorias Secret |
Universal Music and Victorias Secret Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Victorias Secret
The main advantage of trading using opposite Universal Music and Victorias Secret positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Victorias Secret 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 Victorias Secret will offset losses from the drop in Victorias Secret'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, |
| Victorias Secret vs. Ross Stores | Victorias Secret vs. Childrens Place | Victorias Secret vs. Buckle Inc | Victorias Secret vs. Guess Inc |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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