Correlation Between Prosus NV and Universal Music

Can any of the company-specific risk be diversified away by investing in both Prosus NV 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 Prosus NV and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prosus NV and Universal Music Group, you can compare the effects of market volatilities on Prosus NV 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 Prosus NV with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus NV and Universal Music.

Diversification Opportunities for Prosus NV and Universal Music

0.8

Correlation Coefficient

Prosus NV  Universal Music

Very poor diversification

The 3 months correlation between Prosus and Universal is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV 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 Prosus NV 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 Prosus NV 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 Prosus NV i.e., Prosus NV and Universal Music go up and down completely randomly.

Pair Corralation between Prosus NV and Universal Music

Assuming the 90 days trading horizon Prosus NV is expected to generate 1.5 times more return on investment than Universal Music. However, Prosus NV is 1.5 times more volatile than Universal Music Group. It trades about 0.09 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.07 per unit of risk. If you would invest  4,344  in Prosus NV on April 20, 2025 and sell it today you would earn a total of  637.00  from holding Prosus NV or generate 14.66% return on investment over 90 days.

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

Prosus NV  vs.  Universal Music Group

Prosus NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Prosus NV unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of comparatively weak technical and fundamental indicators, Universal Music may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Prosus NV and Universal Music

The main advantage of trading using opposite Prosus NV and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus NV 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 Prosus NV 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.