Correlation Between Stepstone and Warner Music
Can any of the company-specific risk be diversified away by investing in both Stepstone 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 Stepstone and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Warner Music Group, you can compare the effects of market volatilities on Stepstone 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 Stepstone with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Warner Music.
Diversification Opportunities for Stepstone and Warner Music
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stepstone and Warner is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group 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 Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and Warner Music go up and down completely randomly.
Pair Corralation between Stepstone and Warner Music
Given the investment horizon of 90 days Stepstone Group is expected to generate 1.7 times more return on investment than Warner Music. However, Stepstone is 1.7 times more volatile than Warner Music Group. It trades about 0.03 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.02 per unit of risk. If you would invest 5,630 in Stepstone Group on September 23, 2024 and sell it today you would earn a total of 182.00 from holding Stepstone Group or generate 3.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Stepstone Group vs. Warner Music Group
Performance |
Timeline |
Stepstone Group |
Warner Music Group |
Stepstone and Warner Music Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Stepstone and Warner Music
The main advantage of trading using opposite Stepstone and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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.Stepstone vs. Aquagold International | Stepstone vs. Morningstar Unconstrained Allocation | Stepstone vs. Thrivent High Yield | Stepstone vs. Via Renewables |
Warner Music vs. Warner Bros Discovery | Warner Music vs. Paramount Global Class | Warner Music vs. Live Nation Entertainment | Warner Music vs. iQIYI Inc |
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 CEOs Directory module to screen CEOs from public companies around the world.
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