Correlation Between Universal Media and New Wave
Can any of the company-specific risk be diversified away by investing in both Universal Media and New Wave 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 Media and New Wave into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Media Group and New Wave Holdings, you can compare the effects of market volatilities on Universal Media and New Wave 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 Media with a short position of New Wave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Media and New Wave.
Diversification Opportunities for Universal Media and New Wave
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Universal and New is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Universal Media Group and New Wave Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Wave Holdings and Universal Media 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 Media Group are associated (or correlated) with New Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Wave Holdings has no effect on the direction of Universal Media i.e., Universal Media and New Wave go up and down completely randomly.
Pair Corralation between Universal Media and New Wave
Given the investment horizon of 90 days Universal Media is expected to generate 20.16 times less return on investment than New Wave. But when comparing it to its historical volatility, Universal Media Group is 4.69 times less risky than New Wave. It trades about 0.02 of its potential returns per unit of risk. New Wave Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2.05 in New Wave Holdings on August 31, 2024 and sell it today you would lose (0.84) from holding New Wave Holdings or give up 40.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Media Group vs. New Wave Holdings
Performance |
| Timeline |
| Universal Media Group |
| New Wave Holdings |
Universal Media and New Wave Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Media and New Wave
The main advantage of trading using opposite Universal Media and New Wave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Media position performs unexpectedly, New Wave 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 New Wave will offset losses from the drop in New Wave's long position.| Universal Media vs. Cars Inc | Universal Media vs. FormFactor | Universal Media vs. Playtika Holding Corp | Universal Media vs. Mind Technology |
| New Wave vs. ZoomerMedia Limited | New Wave vs. OverActive Media Corp | New Wave vs. Network Media Group | New Wave vs. Celtic plc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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