Correlation Between Talanx AG and Warner Music

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

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

Diversification Opportunities for Talanx AG and Warner Music

0.57

Correlation Coefficient

Talanx AG  Warner Music

Very weak diversification

The 3 months correlation between Talanx and Warner is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG 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 Talanx AG 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 Talanx AG 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 Talanx AG i.e., Talanx AG and Warner Music go up and down completely randomly.

Pair Corralation between Talanx AG and Warner Music

Assuming the 90 days horizon Talanx AG is expected to under-perform the Warner Music. In addition to that, Talanx AG is 1.01 times more volatile than Warner Music Group. It trades about -0.09 of its total potential returns per unit of risk. Warner Music Group is currently generating about -0.05 per unit of volatility. If you would invest  3,020  in Warner Music Group on October 6, 2024 and sell it today you would lose (34.00) from holding Warner Music Group or give up 1.13% of portfolio value over 90 days.

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

Talanx AG  vs.  Warner Music Group

Talanx AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Warner Music Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Talanx AG and Warner Music

The main advantage of trading using opposite Talanx AG and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talanx AG 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 Talanx AG 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.