Correlation Between Warner Music and Raytheon Technologies

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

Diversification Opportunities for Warner Music and Raytheon Technologies

-0.01

Correlation Coefficient

Warner Music  Raytheon Technologies

Good diversification

The 3 months correlation between Warner and Raytheon is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Warner Music i.e., Warner Music and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Warner Music and Raytheon Technologies

Assuming the 90 days horizon Warner Music Group is expected to under-perform the Raytheon Technologies. In addition to that, Warner Music is 1.16 times more volatile than Raytheon Technologies Corp. It trades about -0.08 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.04 per unit of volatility. If you would invest  11,274  in Raytheon Technologies Corp on October 4, 2024 and sell it today you would earn a total of  72.00  from holding Raytheon Technologies Corp or generate 0.64% return on investment over 90 days.

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

Warner Music Group  vs.  Raytheon Technologies Corp

Warner Music Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Warner Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Raytheon Technologies

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Warner Music and Raytheon Technologies

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

The idea behind Warner Music Group and Raytheon Technologies Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.