Correlation Between IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050

Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050 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 IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IMPERIAL TOBACCO and UNIVMUSIC GRPADR050, you can compare the effects of market volatilities on IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050 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 IMPERIAL TOBACCO with a short position of UNIVMUSIC GRPADR/050. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050.

Diversification Opportunities for IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050

-0.41

Correlation Coefficient

IMPERIAL TOBACCO  UNIVMUSIC GRPADR/050

Very good diversification

The 3 months correlation between IMPERIAL and UNIVMUSIC is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and UNIVMUSIC GRPADR050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVMUSIC GRPADR/050 and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with UNIVMUSIC GRPADR/050. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVMUSIC GRPADR/050 has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050 go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to under-perform the UNIVMUSIC GRPADR/050. But the stock apears to be less risky and, when comparing its historical volatility, IMPERIAL TOBACCO is 1.08 times less risky than UNIVMUSIC GRPADR/050. The stock trades about -0.03 of its potential returns per unit of risk. The UNIVMUSIC GRPADR050 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,208  in UNIVMUSIC GRPADR050 on April 24, 2025 and sell it today you would earn a total of  122.00  from holding UNIVMUSIC GRPADR050 or generate 10.1% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  UNIVMUSIC GRPADR050

IMPERIAL TOBACCO

Risk-Adjusted Performance

Very Weak

Over the last 90 days IMPERIAL TOBACCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IMPERIAL TOBACCO is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

UNIVMUSIC GRPADR/050

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVMUSIC GRPADR050 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, UNIVMUSIC GRPADR/050 may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050

The main advantage of trading using opposite IMPERIAL TOBACCO and UNIVMUSIC GRPADR/050 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR/050 will offset losses from the drop in UNIVMUSIC GRPADR/050's long position.

The idea behind IMPERIAL TOBACCO and UNIVMUSIC GRPADR050 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.