Correlation Between UNIVERSAL MUSIC and SYSTEMAIR

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

Diversification Opportunities for UNIVERSAL MUSIC and SYSTEMAIR

0.77

Correlation Coefficient

UNIVERSAL MUSIC  SYSTEMAIR

Poor diversification

The 3 months correlation between UNIVERSAL and SYSTEMAIR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and SYSTEMAIR go up and down completely randomly.

Pair Corralation between UNIVERSAL MUSIC and SYSTEMAIR

Assuming the 90 days horizon UNIVERSAL MUSIC is expected to generate 1.69 times less return on investment than SYSTEMAIR. But when comparing it to its historical volatility, UNIVERSAL MUSIC GROUP is 1.55 times less risky than SYSTEMAIR. It trades about 0.13 of its potential returns per unit of risk. SYSTEMAIR AB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  699.00  in SYSTEMAIR AB on April 24, 2025 and sell it today you would earn a total of  126.00  from holding SYSTEMAIR AB or generate 18.03% return on investment over 90 days.

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

UNIVERSAL MUSIC GROUP  vs.  SYSTEMAIR AB

UNIVERSAL MUSIC GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL MUSIC GROUP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, UNIVERSAL MUSIC may actually be approaching a critical reversion point that can send shares even higher in August 2025.

SYSTEMAIR AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SYSTEMAIR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNIVERSAL MUSIC and SYSTEMAIR

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

The idea behind UNIVERSAL MUSIC GROUP and SYSTEMAIR AB 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.