Correlation Between Universal Music and Future Metals
Can any of the company-specific risk be diversified away by investing in both Universal Music and Future Metals 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 Future Metals 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 Future Metals NL, you can compare the effects of market volatilities on Universal Music and Future Metals 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 Future Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Future Metals.
Diversification Opportunities for Universal Music and Future Metals
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Future is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL 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 Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Universal Music i.e., Universal Music and Future Metals go up and down completely randomly.
Pair Corralation between Universal Music and Future Metals
Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.31 times more return on investment than Future Metals. However, Universal Music Group is 3.18 times less risky than Future Metals. It trades about 0.09 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.09 per unit of risk. If you would invest 2,296 in Universal Music Group on September 25, 2024 and sell it today you would earn a total of 145.00 from holding Universal Music Group or generate 6.32% 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. Future Metals NL
Performance |
Timeline |
Universal Music Group |
Future Metals NL |
Universal Music and Future Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Universal Music and Future Metals
The main advantage of trading using opposite Universal Music and Future Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Future Metals 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 Future Metals will offset losses from the drop in Future Metals' long position.Universal Music vs. Future Metals NL | Universal Music vs. Ecofin Global Utilities | Universal Music vs. Amedeo Air Four | Universal Music vs. Fair Oaks Income |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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