Correlation Between Axalta Coating and Universal Music

Can any of the company-specific risk be diversified away by investing in both Axalta Coating 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 Axalta Coating and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axalta Coating Systems and Universal Music Group, you can compare the effects of market volatilities on Axalta Coating 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 Axalta Coating with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axalta Coating and Universal Music.

Diversification Opportunities for Axalta Coating and Universal Music

-0.68

Correlation Coefficient

Axalta Coating  Universal Music

Excellent diversification

The 3 months correlation between Axalta and Universal is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems 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 Axalta Coating 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 Axalta Coating Systems 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 Axalta Coating i.e., Axalta Coating and Universal Music go up and down completely randomly.

Pair Corralation between Axalta Coating and Universal Music

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the Universal Music. But the stock apears to be less risky and, when comparing its historical volatility, Axalta Coating Systems is 1.78 times less risky than Universal Music. The stock trades about -0.47 of its potential returns per unit of risk. The Universal Music Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,320  in Universal Music Group on September 22, 2024 and sell it today you would earn a total of  180.00  from holding Universal Music Group or generate 7.76% return on investment over 90 days.

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

Axalta Coating Systems  vs.  Universal Music Group

Axalta Coating Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axalta Coating Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Axalta Coating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Universal Music Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Universal Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Axalta Coating and Universal Music

The main advantage of trading using opposite Axalta Coating and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axalta Coating 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.

The idea behind Axalta Coating Systems and Universal Music 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.