Correlation Between Warner Music and Global X

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

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

Diversification Opportunities for Warner Music and Global X

0.92

Correlation Coefficient

Warner Music  Global X

Almost no diversification

The 3 months correlation between Warner and Global is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds and Warner Music 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 Warner Music Group are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of Warner Music i.e., Warner Music and Global X go up and down completely randomly.

Pair Corralation between Warner Music and Global X

Assuming the 90 days trading horizon Warner Music is expected to generate 1.07 times less return on investment than Global X. In addition to that, Warner Music is 1.14 times more volatile than Global X Funds. It trades about 0.24 of its total potential returns per unit of risk. Global X Funds is currently generating about 0.29 per unit of volatility. If you would invest  4,090  in Global X Funds on September 10, 2024 and sell it today you would earn a total of  1,110  from holding Global X Funds or generate 27.14% return on investment over 90 days.

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

Warner Music Group  vs.  Global X Funds

Warner Music Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Warner Music sustained solid returns over the last few months and may actually be approaching a breakup point.

Global X Funds

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Music and Global X

The main advantage of trading using opposite Warner Music and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.

The idea behind Warner Music Group and Global X Funds 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.