Correlation Between Universal Music and Elmos Semiconductor

Can any of the company-specific risk be diversified away by investing in both Universal Music and Elmos Semiconductor 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 Elmos Semiconductor 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 Elmos Semiconductor SE, you can compare the effects of market volatilities on Universal Music and Elmos Semiconductor 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 Elmos Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Elmos Semiconductor.

Diversification Opportunities for Universal Music and Elmos Semiconductor

0.31

Correlation Coefficient

Universal Music  Elmos Semiconductor

Weak diversification

The 3 months correlation between Universal and Elmos is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor 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 Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Universal Music i.e., Universal Music and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Universal Music and Elmos Semiconductor

Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.35 times more return on investment than Elmos Semiconductor. However, Universal Music Group is 2.88 times less risky than Elmos Semiconductor. It trades about 0.12 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about 0.02 per unit of risk. If you would invest  2,292  in Universal Music Group on September 19, 2024 and sell it today you would earn a total of  187.00  from holding Universal Music Group or generate 8.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Universal Music Group  vs.  Elmos Semiconductor SE

Universal Music Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Universal Music may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Elmos Semiconductor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Elmos Semiconductor is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Universal Music and Elmos Semiconductor

The main advantage of trading using opposite Universal Music and Elmos Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Elmos Semiconductor 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 Elmos Semiconductor will offset losses from the drop in Elmos Semiconductor's long position.

The idea behind Universal Music Group and Elmos Semiconductor SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.