Correlation Between Caesars Entertainment, and Warner Music

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

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

Diversification Opportunities for Caesars Entertainment, and Warner Music

-0.17

Correlation Coefficient

Caesars Entertainment,  Warner Music

Good diversification

The 3 months correlation between Caesars and Warner is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Caesars Entertainment, 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 Caesars Entertainment, 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 Caesars Entertainment, 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 Caesars Entertainment, i.e., Caesars Entertainment, and Warner Music go up and down completely randomly.

Pair Corralation between Caesars Entertainment, and Warner Music

Assuming the 90 days trading horizon Caesars Entertainment, is expected to under-perform the Warner Music. In addition to that, Caesars Entertainment, is 1.29 times more volatile than Warner Music Group. It trades about -0.2 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.01 per unit of volatility. If you would invest  4,608  in Warner Music Group on October 21, 2024 and sell it today you would lose (13.00) from holding Warner Music Group or give up 0.28% of portfolio value over 90 days.

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

Caesars Entertainment,  vs.  Warner Music Group

Caesars Entertainment,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caesars Entertainment, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Warner Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Warner Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Warner Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caesars Entertainment, and Warner Music

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

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.