Correlation Between Warner Bros and AMC Entertainment

Can any of the company-specific risk be diversified away by investing in both Warner Bros and AMC Entertainment 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 Bros and AMC Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Warner Bros Discovery and AMC Entertainment Holdings, you can compare the effects of market volatilities on Warner Bros and AMC Entertainment 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 Bros with a short position of AMC Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Bros and AMC Entertainment.

Diversification Opportunities for Warner Bros and AMC Entertainment

0.04

Correlation Coefficient

Warner Bros  AMC Entertainment

Significant diversification

The 3 months correlation between Warner and AMC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and AMC Entertainment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Entertainment and Warner Bros 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 Bros Discovery are associated (or correlated) with AMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Entertainment has no effect on the direction of Warner Bros i.e., Warner Bros and AMC Entertainment go up and down completely randomly.

Pair Corralation between Warner Bros and AMC Entertainment

Considering the 90-day investment horizon Warner Bros Discovery is expected to generate 1.33 times more return on investment than AMC Entertainment. However, Warner Bros is 1.33 times more volatile than AMC Entertainment Holdings. It trades about 0.14 of its potential returns per unit of risk. AMC Entertainment Holdings is currently generating about 0.01 per unit of risk. If you would invest  784.00  in Warner Bros Discovery on August 30, 2024 and sell it today you would earn a total of  227.00  from holding Warner Bros Discovery or generate 28.95% return on investment over 90 days.

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

Warner Bros Discovery  vs.  AMC Entertainment Holdings

Warner Bros Discovery

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

AMC Entertainment

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days AMC Entertainment Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, AMC Entertainment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Warner Bros and AMC Entertainment

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

The idea behind Warner Bros Discovery and AMC Entertainment Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.