Correlation Between Universal Music and PVH Corp

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

Diversification Opportunities for Universal Music and PVH Corp

-0.52

Correlation Coefficient

Universal Music  PVH Corp

Excellent diversification

The 3 months correlation between Universal and PVH is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Universal Music i.e., Universal Music and PVH Corp go up and down completely randomly.

Pair Corralation between Universal Music and PVH Corp

Assuming the 90 days horizon Universal Music Group is expected to under-perform the PVH Corp. In addition to that, Universal Music is 1.09 times more volatile than PVH Corp. It trades about -0.04 of its total potential returns per unit of risk. PVH Corp is currently generating about 0.13 per unit of volatility. If you would invest  9,680  in PVH Corp on September 5, 2024 and sell it today you would earn a total of  1,479  from holding PVH Corp or generate 15.28% return on investment over 90 days.

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

Universal Music Group  vs.  PVH Corp

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.

PVH Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PVH Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, PVH Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Music and PVH Corp

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

The idea behind Universal Music Group and PVH Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.