Correlation Between Universal Music and Capital Clean

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

Diversification Opportunities for Universal Music and Capital Clean

-0.06

Correlation Coefficient

Universal Music  Capital Clean

Good diversification

The 3 months correlation between Universal and Capital is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and Capital Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Clean Energy 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 Capital Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Clean Energy has no effect on the direction of Universal Music i.e., Universal Music and Capital Clean go up and down completely randomly.

Pair Corralation between Universal Music and Capital Clean

Assuming the 90 days horizon Universal Music Group is expected to under-perform the Capital Clean. But the pink sheet apears to be less risky and, when comparing its historical volatility, Universal Music Group is 1.1 times less risky than Capital Clean. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Capital Clean Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,718  in Capital Clean Energy on September 3, 2024 and sell it today you would earn a total of  70.00  from holding Capital Clean Energy or generate 4.07% return on investment over 90 days.

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

Universal Music Group  vs.  Capital Clean Energy

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Capital Clean Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Clean Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Capital Clean is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Universal Music and Capital Clean

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

The idea behind Universal Music Group and Capital Clean Energy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.