Correlation Between Warner Music and Kforce

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

Diversification Opportunities for Warner Music and Kforce

0.49

Correlation Coefficient

Warner Music  Kforce

Very weak diversification

The 3 months correlation between Warner and Kforce is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Kforce Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kforce Inc 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 Kforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kforce Inc has no effect on the direction of Warner Music i.e., Warner Music and Kforce go up and down completely randomly.

Pair Corralation between Warner Music and Kforce

Assuming the 90 days horizon Warner Music Group is expected to under-perform the Kforce. In addition to that, Warner Music is 1.04 times more volatile than Kforce Inc. It trades about -0.05 of its total potential returns per unit of risk. Kforce Inc is currently generating about -0.04 per unit of volatility. If you would invest  5,463  in Kforce Inc on September 29, 2024 and sell it today you would lose (63.00) from holding Kforce Inc or give up 1.15% of portfolio value over 90 days.

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

Warner Music Group  vs.  Kforce Inc

Warner Music Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 7 (%) 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 January 2025.

Kforce Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kforce Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kforce is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Warner Music and Kforce

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

The idea behind Warner Music Group and Kforce Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.