Correlation Between Universal Music and Reckitt Benckiser

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

Diversification Opportunities for Universal Music and Reckitt Benckiser

UniversalReckittDiversified AwayUniversalReckittDiversified Away100%
0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Universal and Reckitt is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of Universal Music i.e., Universal Music and Reckitt Benckiser go up and down completely randomly.

Pair Corralation between Universal Music and Reckitt Benckiser

If you would invest  2,254  in Universal Music Group on September 26, 2024 and sell it today you would earn a total of  215.00  from holding Universal Music Group or generate 9.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

Universal Music Group  vs.  Reckitt Benckiser Group

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -202468
JavaScript chart by amCharts 3.21.150UMG RB
       Timeline  
Universal Music Group 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 7 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2121.52222.52323.52424.525
Reckitt Benckiser 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Reckitt Benckiser Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Reckitt Benckiser is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Universal Music and Reckitt Benckiser Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.39-2.54-1.69-0.840.01490.891.792.683.58 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.150UMG RB
       Returns  

Pair Trading with Universal Music and Reckitt Benckiser

The main advantage of trading using opposite Universal Music and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.
The idea behind Universal Music Group and Reckitt Benckiser Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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