Correlation Between Seven Arts and Universal Media

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

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

Diversification Opportunities for Seven Arts and Universal Media

0.58

Correlation Coefficient

Seven Arts  Universal Media

Very weak diversification

The 3 months correlation between Seven and Universal is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Seven Arts Entertainment and Universal Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Media Group and Seven Arts 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 Seven Arts Entertainment are associated (or correlated) with Universal Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Media Group has no effect on the direction of Seven Arts i.e., Seven Arts and Universal Media go up and down completely randomly.

Pair Corralation between Seven Arts and Universal Media

Given the investment horizon of 90 days Seven Arts is expected to generate 2.91 times less return on investment than Universal Media. In addition to that, Seven Arts is 1.13 times more volatile than Universal Media Group. It trades about 0.04 of its total potential returns per unit of risk. Universal Media Group is currently generating about 0.12 per unit of volatility. If you would invest  2.50  in Universal Media Group on September 27, 2024 and sell it today you would earn a total of  0.40  from holding Universal Media Group or generate 16.0% return on investment over 90 days.

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

Seven Arts Entertainment  vs.  Universal Media Group

Seven Arts Entertainment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seven Arts Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Seven Arts showed solid returns over the last few months and may actually be approaching a breakup point.

Universal Media Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Media Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Universal Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seven Arts and Universal Media

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

The idea behind Seven Arts Entertainment and Universal Media 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.