Correlation Between Universal Music and Paramount Global
Can any of the company-specific risk be diversified away by investing in both Universal Music and Paramount Global 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 Paramount Global 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 Paramount Global Class, you can compare the effects of market volatilities on Universal Music and Paramount Global 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 Paramount Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Paramount Global.
Diversification Opportunities for Universal Music and Paramount Global
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Paramount is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Paramount Global Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global Class 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global Class has no effect on the direction of Universal Music i.e., Universal Music and Paramount Global go up and down completely randomly.
Pair Corralation between Universal Music and Paramount Global
Assuming the 90 days horizon Universal Music Group is expected to under-perform the Paramount Global. But the pink sheet apears to be less risky and, when comparing its historical volatility, Universal Music Group is 1.87 times less risky than Paramount Global. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Paramount Global Class is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,066 in Paramount Global Class on August 31, 2024 and sell it today you would earn a total of 11.00 from holding Paramount Global Class or generate 1.03% 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. Paramount Global Class
Performance |
| Timeline |
| Universal Music Group |
| Paramount Global Class |
Universal Music and Paramount Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Paramount Global
The main advantage of trading using opposite Universal Music and Paramount Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Paramount Global 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 Paramount Global will offset losses from the drop in Paramount Global's long position.| Universal Music vs. Universal Media Group | Universal Music vs. Bollor SE | Universal Music vs. Reading International | Universal Music vs. Warner Music Group |
| Paramount Global vs. News Corp B | Paramount Global vs. Fox Corp Class | Paramount Global vs. AMC Networks | Paramount Global vs. Marcus |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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