Correlation Between Global E and Warner Bros

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

By analyzing existing cross correlation between Global E Online and Warner Bros Discovery, you can compare the effects of market volatilities on Global E and Warner Bros 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 E with a short position of Warner Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Warner Bros.

Diversification Opportunities for Global E and Warner Bros

0.94

Correlation Coefficient

Global E  Warner Bros

Almost no diversification

The 3 months correlation between Global and Warner is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Warner Bros Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Bros Discovery and Global E 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 E Online are associated (or correlated) with Warner Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Bros Discovery has no effect on the direction of Global E i.e., Global E and Warner Bros go up and down completely randomly.

Pair Corralation between Global E and Warner Bros

Given the investment horizon of 90 days Global E Online is expected to generate 1.02 times more return on investment than Warner Bros. However, Global E is 1.02 times more volatile than Warner Bros Discovery. It trades about 0.08 of its potential returns per unit of risk. Warner Bros Discovery is currently generating about 0.02 per unit of risk. If you would invest  2,075  in Global E Online on September 23, 2024 and sell it today you would earn a total of  3,403  from holding Global E Online or generate 164.0% return on investment over 90 days.

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

Global E Online  vs.  Warner Bros Discovery

Global E Online

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Warner Bros Discovery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global E and Warner Bros

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

The idea behind Global E Online and Warner Bros Discovery 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.