Correlation Between Sphere Entertainment and Warner Bros

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

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

Diversification Opportunities for Sphere Entertainment and Warner Bros

-0.83

Correlation Coefficient

Sphere Entertainment  Warner Bros

Pay attention - limited upside

The 3 months correlation between Sphere and Warner is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Warner Bros go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Warner Bros

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Warner Bros. But the stock apears to be less risky and, when comparing its historical volatility, Sphere Entertainment Co is 1.29 times less risky than Warner Bros. The stock trades about -0.02 of its potential returns per unit of risk. The Warner Bros Discovery is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  816.00  in Warner Bros Discovery on September 23, 2024 and sell it today you would earn a total of  253.00  from holding Warner Bros Discovery or generate 31.0% return on investment over 90 days.

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

Sphere Entertainment Co  vs.  Warner Bros Discovery

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 Sphere Entertainment and Warner Bros

The main advantage of trading using opposite Sphere Entertainment and Warner Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.