Correlation Between Universal Music and Warner Music
Can any of the company-specific risk be diversified away by investing in both Universal Music and Warner Music 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 Warner Music 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 Warner Music Group, you can compare the effects of market volatilities on Universal Music and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Warner Music.
Diversification Opportunities for Universal Music and Warner Music
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Universal and Warner is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Universal Music i.e., Universal Music and Warner Music go up and down completely randomly.
Pair Corralation between Universal Music and Warner Music
Assuming the 90 days horizon Universal Music Group is expected to generate 1.0 times more return on investment than Warner Music. However, Universal Music is 1.0 times more volatile than Warner Music Group. It trades about 0.35 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.08 per unit of risk. If you would invest 1,231 in Universal Music Group on November 4, 2024 and sell it today you would earn a total of 167.00 from holding Universal Music Group or generate 13.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Warner Music Group
Performance |
| Timeline |
| Universal Music Group |
| Warner Music Group |
Universal Music and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Warner Music
The main advantage of trading using opposite Universal Music and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Universal Music vs. New Wave Holdings | Universal Music vs. Guild Esports Plc | Universal Music vs. Celtic plc | Universal Music vs. OverActive Media Corp |
| Warner Music vs. Liberty Media | Warner Music vs. Atlanta Braves Holdings, | Warner Music vs. News Corp B | Warner Music vs. News Corp A |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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