Correlation Between Warner Music and Annaly Capital

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

Diversification Opportunities for Warner Music and Annaly Capital

0.53

Correlation Coefficient

Warner Music  Annaly Capital

Very weak diversification

The 3 months correlation between Warner and Annaly is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Annaly Capital Management, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Manag 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Manag has no effect on the direction of Warner Music i.e., Warner Music and Annaly Capital go up and down completely randomly.

Pair Corralation between Warner Music and Annaly Capital

Assuming the 90 days trading horizon Warner Music Group is expected to under-perform the Annaly Capital. In addition to that, Warner Music is 1.07 times more volatile than Annaly Capital Management,. It trades about -0.02 of its total potential returns per unit of risk. Annaly Capital Management, is currently generating about 0.07 per unit of volatility. If you would invest  11,049  in Annaly Capital Management, on October 25, 2024 and sell it today you would earn a total of  551.00  from holding Annaly Capital Management, or generate 4.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.66%
Values	Daily Returns

Warner Music Group  vs.  Annaly Capital Management,

Warner Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Warner Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Warner Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Annaly Capital Manag

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Annaly Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Warner Music and Annaly Capital

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

The idea behind Warner Music Group and Annaly Capital Management, 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 CEOs Directory module to screen CEOs from public companies around the world.