Correlation Between Universal Music and Cracker Barrel

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

Diversification Opportunities for Universal Music and Cracker Barrel

-0.46

Correlation Coefficient

Universal Music  Cracker Barrel

Very good diversification

The 3 months correlation between Universal and Cracker is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Cracker Barrel Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cracker Barrel Old 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 Cracker Barrel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cracker Barrel Old has no effect on the direction of Universal Music i.e., Universal Music and Cracker Barrel go up and down completely randomly.

Pair Corralation between Universal Music and Cracker Barrel

Assuming the 90 days horizon Universal Music Group is expected to under-perform the Cracker Barrel. But the pink sheet apears to be less risky and, when comparing its historical volatility, Universal Music Group is 1.73 times less risky than Cracker Barrel. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Cracker Barrel Old is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,645  in Cracker Barrel Old on September 12, 2024 and sell it today you would earn a total of  1,559  from holding Cracker Barrel Old or generate 42.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Universal Music Group  vs.  Cracker Barrel Old

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.

Cracker Barrel Old

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Music and Cracker Barrel

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

The idea behind Universal Music Group and Cracker Barrel Old 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.