Correlation Between MidCap Financial and UNIVERSAL MUSIC

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

By analyzing existing cross correlation between MidCap Financial Investment and UNIVERSAL MUSIC GROUP, you can compare the effects of market volatilities on MidCap Financial and UNIVERSAL MUSIC 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 MidCap Financial with a short position of UNIVERSAL MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and UNIVERSAL MUSIC.

Diversification Opportunities for MidCap Financial and UNIVERSAL MUSIC

0.74

Correlation Coefficient

MidCap Financial  UNIVERSAL MUSIC

Poor diversification

The 3 months correlation between MidCap and UNIVERSAL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and UNIVERSAL MUSIC GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL MUSIC GROUP and MidCap Financial 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 MidCap Financial Investment are associated (or correlated) with UNIVERSAL MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL MUSIC GROUP has no effect on the direction of MidCap Financial i.e., MidCap Financial and UNIVERSAL MUSIC go up and down completely randomly.

Pair Corralation between MidCap Financial and UNIVERSAL MUSIC

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 1.1 times more return on investment than UNIVERSAL MUSIC. However, MidCap Financial is 1.1 times more volatile than UNIVERSAL MUSIC GROUP. It trades about 0.18 of its potential returns per unit of risk. UNIVERSAL MUSIC GROUP is currently generating about 0.17 per unit of risk. If you would invest  981.00  in MidCap Financial Investment on April 22, 2025 and sell it today you would earn a total of  159.00  from holding MidCap Financial Investment or generate 16.21% return on investment over 90 days.

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

MidCap Financial Investment  vs.  UNIVERSAL MUSIC GROUP

MidCap Financial Inv

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MidCap Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with MidCap Financial and UNIVERSAL MUSIC

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

The idea behind MidCap Financial Investment and UNIVERSAL MUSIC GROUP 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.