Correlation Between Warner Music and LABYRINTH RESOURCES

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

Diversification Opportunities for Warner Music and LABYRINTH RESOURCES

0.65

Correlation Coefficient

Warner Music  LABYRINTH RESOURCES

Poor diversification

The 3 months correlation between Warner and LABYRINTH is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and LABYRINTH RESOURCES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LABYRINTH RESOURCES LTD 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 LABYRINTH RESOURCES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LABYRINTH RESOURCES LTD has no effect on the direction of Warner Music i.e., Warner Music and LABYRINTH RESOURCES go up and down completely randomly.

Pair Corralation between Warner Music and LABYRINTH RESOURCES

Assuming the 90 days horizon Warner Music is expected to generate 293.08 times less return on investment than LABYRINTH RESOURCES. But when comparing it to its historical volatility, Warner Music Group is 25.7 times less risky than LABYRINTH RESOURCES. It trades about 0.01 of its potential returns per unit of risk. LABYRINTH RESOURCES LTD is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3.31  in LABYRINTH RESOURCES LTD on October 4, 2024 and sell it today you would earn a total of  3.69  from holding LABYRINTH RESOURCES LTD or generate 111.48% 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.  LABYRINTH RESOURCES LTD

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.

LABYRINTH RESOURCES LTD

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LABYRINTH RESOURCES LTD are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, LABYRINTH RESOURCES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Music and LABYRINTH RESOURCES

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

The idea behind Warner Music Group and LABYRINTH RESOURCES LTD 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.