Correlation Between Universal Music and Allfunds

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

Diversification Opportunities for Universal Music and Allfunds

0.0

Correlation Coefficient

Universal Music  Allfunds

Pay attention - limited upside

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

Pair Corralation between Universal Music and Allfunds

Assuming the 90 days trading horizon Universal Music Group is expected to generate 0.64 times more return on investment than Allfunds. However, Universal Music Group is 1.56 times less risky than Allfunds. It trades about 0.37 of its potential returns per unit of risk. Allfunds Group is currently generating about -0.04 per unit of risk. If you would invest  2,266  in Universal Music Group on September 19, 2024 and sell it today you would earn a total of  224.00  from holding Universal Music Group or generate 9.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Universal Music Group  vs.  Allfunds Group

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 weak technical and fundamental indicators, Universal Music may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Allfunds Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Universal Music and Allfunds

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

The idea behind Universal Music Group and Allfunds 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.