Correlation Between Stepstone and Warner Music

Specify exactly 2 symbols:
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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Stepstone Group  vs.  Warner Music Group

 Performance 
       Timeline  
Stepstone Group 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
Warner Music Group 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Warner Music is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.
The idea behind Stepstone Group 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 CEOs Directory module to screen CEOs from public companies around the world.

Other Complementary Tools

Commodity Directory
Find actively traded commodities issued by global exchanges
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas