Correlation Between Relx PLC and Universal Music

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

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

Diversification Opportunities for Relx PLC and Universal Music

0.4

Correlation Coefficient

Relx PLC  Universal Music

Very weak diversification

The 3 months correlation between Relx and Universal is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC 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 Relx PLC 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 Relx PLC 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 Relx PLC i.e., Relx PLC and Universal Music go up and down completely randomly.

Pair Corralation between Relx PLC and Universal Music

Assuming the 90 days trading horizon Relx PLC is expected to generate 10.46 times less return on investment than Universal Music. But when comparing it to its historical volatility, Relx PLC is 1.41 times less risky than Universal Music. It trades about 0.02 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,426  in Universal Music Group on April 22, 2025 and sell it today you would earn a total of  273.00  from holding Universal Music Group or generate 11.25% return on investment over 90 days.

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

Relx PLC  vs.  Universal Music Group

Relx PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Relx PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Relx PLC and Universal Music

The main advantage of trading using opposite Relx PLC and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC 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 Relx PLC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.