Correlation Between Warner Music and Mosaic

Can any of the company-specific risk be diversified away by investing in both Warner Music and Mosaic 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 Mosaic 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 The Mosaic, you can compare the effects of market volatilities on Warner Music and Mosaic 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 Mosaic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Mosaic.

Diversification Opportunities for Warner Music and Mosaic

0.69

Correlation Coefficient

Warner Music  Mosaic

Poor diversification

The 3 months correlation between Warner and Mosaic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic 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 Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of Warner Music i.e., Warner Music and Mosaic go up and down completely randomly.

Pair Corralation between Warner Music and Mosaic

Assuming the 90 days trading horizon Warner Music Group is expected to generate 0.81 times more return on investment than Mosaic. However, Warner Music Group is 1.24 times less risky than Mosaic. It trades about 0.07 of its potential returns per unit of risk. The Mosaic is currently generating about -0.01 per unit of risk. If you would invest  4,223  in Warner Music Group on September 29, 2024 and sell it today you would earn a total of  652.00  from holding Warner Music Group or generate 15.44% return on investment over 90 days.

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

Warner Music Group  vs.  The Mosaic

Warner Music Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 12 (%) 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.

Mosaic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Mosaic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mosaic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Warner Music and Mosaic

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

The idea behind Warner Music Group and The Mosaic 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.