Correlation Between Warner Music and Check Point
Can any of the company-specific risk be diversified away by investing in both Warner Music and Check Point 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 Check Point 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 Check Point Software, you can compare the effects of market volatilities on Warner Music and Check Point 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 Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Check Point.
Diversification Opportunities for Warner Music and Check Point
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and Check is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Warner Music i.e., Warner Music and Check Point go up and down completely randomly.
Pair Corralation between Warner Music and Check Point
Assuming the 90 days horizon Warner Music Group is expected to generate 1.66 times more return on investment than Check Point. However, Warner Music is 1.66 times more volatile than Check Point Software. It trades about 0.11 of its potential returns per unit of risk. Check Point Software is currently generating about 0.04 per unit of risk. If you would invest 3,114 in Warner Music Group on December 2, 2024 and sell it today you would earn a total of 128.00 from holding Warner Music Group or generate 4.11% 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. Check Point Software
Performance |
Timeline |
Warner Music Group |
Check Point Software |
Warner Music and Check Point Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Warner Music and Check Point
The main advantage of trading using opposite Warner Music and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Check Point 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 Check Point will offset losses from the drop in Check Point's long position.Warner Music vs. WESANA HEALTH HOLD | Warner Music vs. PLAYMATES TOYS | Warner Music vs. MPH Health Care | Warner Music vs. Phibro Animal Health |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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