Correlation Between T-Mobile and Warner Music

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

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

Diversification Opportunities for T-Mobile and Warner Music

0.89

Correlation Coefficient

T-Mobile  Warner Music

Very poor diversification

The 3 months correlation between T-Mobile and Warner is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile 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 T-Mobile 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 T Mobile 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 T-Mobile i.e., T-Mobile and Warner Music go up and down completely randomly.

Pair Corralation between T-Mobile and Warner Music

Assuming the 90 days horizon T Mobile is expected to generate 1.04 times more return on investment than Warner Music. However, T-Mobile is 1.04 times more volatile than Warner Music Group. It trades about 0.13 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.08 per unit of risk. If you would invest  19,020  in T Mobile on October 5, 2024 and sell it today you would earn a total of  2,465  from holding T Mobile or generate 12.96% return on investment over 90 days.

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

T Mobile  vs.  Warner Music Group

T Mobile

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days T Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, T-Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

Warner Music Group

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Warner Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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 T-Mobile and Warner Music

The main advantage of trading using opposite T-Mobile and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T-Mobile 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 T Mobile 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.