Correlation Between Transocean and Universal Music

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

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

Diversification Opportunities for Transocean and Universal Music

-0.17

Correlation Coefficient

Transocean  Universal Music

Good diversification

The 3 months correlation between Transocean and Universal is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Transocean 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 Transocean 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 Transocean 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 Transocean i.e., Transocean and Universal Music go up and down completely randomly.

Pair Corralation between Transocean and Universal Music

Considering the 90-day investment horizon Transocean is expected to under-perform the Universal Music. In addition to that, Transocean is 1.34 times more volatile than Universal Music Group. It trades about -0.08 of its total potential returns per unit of risk. Universal Music Group is currently generating about -0.01 per unit of volatility. If you would invest  2,637  in Universal Music Group on September 26, 2024 and sell it today you would lose (73.00) from holding Universal Music Group or give up 2.77% of portfolio value over 90 days.

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

Transocean  vs.  Universal Music Group

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Universal Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Universal Music is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Transocean and Universal Music

The main advantage of trading using opposite Transocean and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transocean 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 Transocean 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.