Correlation Between UNIVERSAL MUSIC and ITOCHU

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

Diversification Opportunities for UNIVERSAL MUSIC and ITOCHU

0.44

Correlation Coefficient

UNIVERSAL MUSIC  ITOCHU

Very weak diversification

The 3 months correlation between UNIVERSAL and ITOCHU is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU 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 ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and ITOCHU go up and down completely randomly.

Pair Corralation between UNIVERSAL MUSIC and ITOCHU

Assuming the 90 days horizon UNIVERSAL MUSIC GROUP is expected to generate 0.85 times more return on investment than ITOCHU. However, UNIVERSAL MUSIC GROUP is 1.17 times less risky than ITOCHU. It trades about 0.17 of its potential returns per unit of risk. ITOCHU is currently generating about 0.01 per unit of risk. If you would invest  2,378  in UNIVERSAL MUSIC GROUP on April 22, 2025 and sell it today you would earn a total of  324.00  from holding UNIVERSAL MUSIC GROUP or generate 13.62% return on investment over 90 days.

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

UNIVERSAL MUSIC GROUP  vs.  ITOCHU

UNIVERSAL MUSIC GROUP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL MUSIC GROUP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, UNIVERSAL MUSIC reported solid returns over the last few months and may actually be approaching a breakup point.

ITOCHU

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITOCHU has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITOCHU is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UNIVERSAL MUSIC and ITOCHU

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

The idea behind UNIVERSAL MUSIC GROUP and ITOCHU 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..