Correlation Between Warner Music and COSTCO WHOLESALE

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

Diversification Opportunities for Warner Music and COSTCO WHOLESALE

WarnerCOSTCODiversified AwayWarnerCOSTCODiversified Away100%
0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Warner and COSTCO is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTCO WHOLESALE CDR has no effect on the direction of Warner Music i.e., Warner Music and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between Warner Music and COSTCO WHOLESALE

Assuming the 90 days horizon Warner Music Group is expected to under-perform the COSTCO WHOLESALE. In addition to that, Warner Music is 1.07 times more volatile than COSTCO WHOLESALE CDR. It trades about -0.02 of its total potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about 0.05 per unit of volatility. If you would invest  2,715  in COSTCO WHOLESALE CDR on October 20, 2024 and sell it today you would earn a total of  105.00  from holding COSTCO WHOLESALE CDR or generate 3.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Warner Music Group  vs.  COSTCO WHOLESALE CDR

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 051015
JavaScript chart by amCharts 3.21.15WA4 CTO0
       Timeline  
Warner Music Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 nearly stable basic indicators, Warner Music is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan28.52929.53030.53131.5
COSTCO WHOLESALE CDR 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTCO WHOLESALE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2728293031

Warner Music and COSTCO WHOLESALE Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.33-3.99-2.65-1.310.02271.342.74.065.42 0.050.100.15
JavaScript chart by amCharts 3.21.15WA4 CTO0
       Returns  

Pair Trading with Warner Music and COSTCO WHOLESALE

The main advantage of trading using opposite Warner Music and COSTCO WHOLESALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, COSTCO WHOLESALE 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 COSTCO WHOLESALE will offset losses from the drop in COSTCO WHOLESALE's long position.
The idea behind Warner Music Group and COSTCO WHOLESALE CDR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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