Correlation Between Global X and Warner Music

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Can any of the company-specific risk be diversified away by investing in both Global X and Warner 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 Global X and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Funds and Warner Music Group, you can compare the effects of market volatilities on Global X and Warner 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 Global X with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Warner Music.

Diversification Opportunities for Global X and Warner Music

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Global and Warner is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group and Global X 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 Global X Funds are associated (or correlated) with Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Global X i.e., Global X and Warner Music go up and down completely randomly.

Pair Corralation between Global X and Warner Music

Assuming the 90 days trading horizon Global X Funds is expected to generate 0.92 times more return on investment than Warner Music. However, Global X Funds is 1.08 times less risky than Warner Music. It trades about 0.3 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.26 per unit of risk. If you would invest  4,034  in Global X Funds on September 6, 2024 and sell it today you would earn a total of  1,121  from holding Global X Funds or generate 27.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Global X Funds  vs.  Warner Music Group

 Performance 
       Timeline  
Global X Funds 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.
Warner Music Group 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Warner Music sustained solid returns over the last few months and may actually be approaching a breakup point.

Global X and Warner Music Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global X and Warner Music

The main advantage of trading using opposite Global X and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Warner 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 Warner Music will offset losses from the drop in Warner Music's long position.
The idea behind Global X Funds and Warner 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.
Check out your portfolio center.
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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