Correlation Between UNIVERSAL MUSIC and PT Bank

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

Diversification Opportunities for UNIVERSAL MUSIC and PT Bank

0.21

Correlation Coefficient

UNIVERSAL MUSIC  PT Bank

Modest diversification

The 3 months correlation between UNIVERSAL and PQ9 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding UNIVERSAL MUSIC GROUP and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Mandiri has no effect on the direction of UNIVERSAL MUSIC i.e., UNIVERSAL MUSIC and PT Bank go up and down completely randomly.

Pair Corralation between UNIVERSAL MUSIC and PT Bank

Assuming the 90 days horizon UNIVERSAL MUSIC is expected to generate 2.53 times less return on investment than PT Bank. But when comparing it to its historical volatility, UNIVERSAL MUSIC GROUP is 6.32 times less risky than PT Bank. It trades about 0.14 of its potential returns per unit of risk. PT Bank Mandiri is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  24.00  in PT Bank Mandiri on April 24, 2025 and sell it today you would earn a total of  2.00  from holding PT Bank Mandiri or generate 8.33% return on investment over 90 days.

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

UNIVERSAL MUSIC GROUP  vs.  PT Bank Mandiri

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 fragile basic indicators, UNIVERSAL MUSIC may actually be approaching a critical reversion point that can send shares even higher in August 2025.

PT Bank Mandiri

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Mandiri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNIVERSAL MUSIC and PT Bank

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

The idea behind UNIVERSAL MUSIC GROUP and PT Bank Mandiri 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.