Correlation Between Universal Music and AMAG Austria

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

Diversification Opportunities for Universal Music and AMAG Austria

0.53

Correlation Coefficient

Universal Music  AMAG Austria

Very weak diversification

The 3 months correlation between Universal and AMAG is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and AMAG Austria Metall in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMAG Austria Metall 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 AMAG Austria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMAG Austria Metall has no effect on the direction of Universal Music i.e., Universal Music and AMAG Austria go up and down completely randomly.

Pair Corralation between Universal Music and AMAG Austria

Assuming the 90 days trading horizon Universal Music Group is expected to generate 1.07 times more return on investment than AMAG Austria. However, Universal Music is 1.07 times more volatile than AMAG Austria Metall. It trades about 0.12 of its potential returns per unit of risk. AMAG Austria Metall is currently generating about 0.06 per unit of risk. If you would invest  2,285  in Universal Music Group on September 20, 2024 and sell it today you would earn a total of  216.00  from holding Universal Music Group or generate 9.45% return on investment over 90 days.

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

Universal Music Group  vs.  AMAG Austria Metall

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

AMAG Austria Metall

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMAG Austria Metall are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, AMAG Austria is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Universal Music and AMAG Austria

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

The idea behind Universal Music Group and AMAG Austria Metall 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 Commodity Directory module to find actively traded commodities issued by global exchanges.