Correlation Between Universal Music and Raiffeisen Bank

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

Diversification Opportunities for Universal Music and Raiffeisen Bank

0.37

Correlation Coefficient

Universal Music  Raiffeisen Bank

Weak diversification

The 3 months correlation between Universal and Raiffeisen is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Raiffeisen Bank International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raiffeisen Bank Inte 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 Raiffeisen Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raiffeisen Bank Inte has no effect on the direction of Universal Music i.e., Universal Music and Raiffeisen Bank go up and down completely randomly.

Pair Corralation between Universal Music and Raiffeisen Bank

Assuming the 90 days trading horizon Universal Music is expected to generate 3.41 times less return on investment than Raiffeisen Bank. But when comparing it to its historical volatility, Universal Music Group is 1.48 times less risky than Raiffeisen Bank. It trades about 0.06 of its potential returns per unit of risk. Raiffeisen Bank International is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,710  in Raiffeisen Bank International on September 15, 2024 and sell it today you would earn a total of  316.00  from holding Raiffeisen Bank International or generate 18.48% return on investment over 90 days.

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

Universal Music Group  vs.  Raiffeisen Bank International

Universal Music Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Universal Music is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Raiffeisen Bank Inte

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Raiffeisen Bank International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Raiffeisen Bank demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Music and Raiffeisen Bank

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

The idea behind Universal Music Group and Raiffeisen Bank International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.