Correlation Between Universal Media and OverActive Media

Can any of the company-specific risk be diversified away by investing in both Universal Media and OverActive Media 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 Media and OverActive Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Universal Media Group and OverActive Media Corp, you can compare the effects of market volatilities on Universal Media and OverActive Media 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 Media with a short position of OverActive Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Media and OverActive Media.

Diversification Opportunities for Universal Media and OverActive Media

-0.36

Correlation Coefficient

Universal Media  OverActive Media

Very good diversification

The 3 months correlation between Universal and OverActive is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Universal Media Group and OverActive Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OverActive Media Corp and Universal Media 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 Media Group are associated (or correlated) with OverActive Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OverActive Media Corp has no effect on the direction of Universal Media i.e., Universal Media and OverActive Media go up and down completely randomly.

Pair Corralation between Universal Media and OverActive Media

Given the investment horizon of 90 days Universal Media is expected to generate 2.01 times less return on investment than OverActive Media. In addition to that, Universal Media is 1.67 times more volatile than OverActive Media Corp. It trades about 0.02 of its total potential returns per unit of risk. OverActive Media Corp is currently generating about 0.08 per unit of volatility. If you would invest  14.00  in OverActive Media Corp on August 31, 2024 and sell it today you would earn a total of  3.00  from holding OverActive Media Corp or generate 21.43% return on investment over 90 days.

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

Universal Media Group  vs.  OverActive Media Corp

Universal Media Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Media Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Universal Media reported solid returns over the last few months and may actually be approaching a breakup point.

OverActive Media Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OverActive Media Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, OverActive Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Media and OverActive Media

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

The idea behind Universal Media Group and OverActive Media 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.