Correlation Between Virgin Wines and Universal Music
Can any of the company-specific risk be diversified away by investing in both Virgin Wines and Universal 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 Virgin Wines and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virgin Wines UK and Universal Music Group, you can compare the effects of market volatilities on Virgin Wines and Universal 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 Virgin Wines with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and Universal Music.
Diversification Opportunities for Virgin Wines and Universal Music
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Virgin and Universal is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Wines UK and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group and Virgin Wines 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 Virgin Wines UK are associated (or correlated) with Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Virgin Wines i.e., Virgin Wines and Universal Music go up and down completely randomly.
Pair Corralation between Virgin Wines and Universal Music
Assuming the 90 days trading horizon Virgin Wines UK is expected to under-perform the Universal Music. But the stock apears to be less risky and, when comparing its historical volatility, Virgin Wines UK is 1.22 times less risky than Universal Music. The stock trades about -0.31 of its potential returns per unit of risk. The Universal Music Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,339 in Universal Music Group on September 12, 2024 and sell it today you would earn a total of 12.00 from holding Universal Music Group or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virgin Wines UK vs. Universal Music Group
Performance |
| Timeline |
| Virgin Wines UK |
| Universal Music Group |
Virgin Wines and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virgin Wines and Universal Music
The main advantage of trading using opposite Virgin Wines and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Wines position performs unexpectedly, Universal 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 Universal Music will offset losses from the drop in Universal Music's long position.| Virgin Wines vs. Hyundai Motor | Virgin Wines vs. Toyota Motor Corp | Virgin Wines vs. SoftBank Group Corp | Virgin Wines vs. Halyk Bank of |
| Universal Music vs. Erste Group Bank | Universal Music vs. British American Tobacco | Universal Music vs. Virgin Wines UK | Universal Music vs. Cincinnati Financial Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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