Correlation Between Warner Music and Kingspan Group

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

Diversification Opportunities for Warner Music and Kingspan Group

-0.76

Correlation Coefficient

Warner Music  Kingspan Group

Pay attention - limited upside

The 3 months correlation between Warner and Kingspan is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group plc 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 Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of Warner Music i.e., Warner Music and Kingspan Group go up and down completely randomly.

Pair Corralation between Warner Music and Kingspan Group

Assuming the 90 days horizon Warner Music Group is expected to generate 1.14 times more return on investment than Kingspan Group. However, Warner Music is 1.14 times more volatile than Kingspan Group plc. It trades about -0.03 of its potential returns per unit of risk. Kingspan Group plc is currently generating about -0.24 per unit of risk. If you would invest  3,042  in Warner Music Group on October 11, 2024 and sell it today you would lose (75.00) from holding Warner Music Group or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.44%
Values	Daily Returns

Warner Music Group  vs.  Kingspan Group plc

Warner Music Group

Risk-Adjusted Performance

5 of 100

Modest

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

Kingspan Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingspan Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Warner Music and Kingspan Group

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

The idea behind Warner Music Group and Kingspan Group plc 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 Anywhere module to track or share privately all of your investments from the convenience of any device.