Correlation Between Warner Bros and Big Screen

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

Diversification Opportunities for Warner Bros and Big Screen

-0.17

Correlation Coefficient

Warner Bros  Big Screen

Good diversification

The 3 months correlation between Warner and Big is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Big Screen Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Screen 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 Big Screen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Screen Entertainment has no effect on the direction of Warner Bros i.e., Warner Bros and Big Screen go up and down completely randomly.

Pair Corralation between Warner Bros and Big Screen

Considering the 90-day investment horizon Warner Bros Discovery is expected to generate 0.13 times more return on investment than Big Screen. However, Warner Bros Discovery is 7.41 times less risky than Big Screen. It trades about 0.18 of its potential returns per unit of risk. Big Screen Entertainment is currently generating about 0.02 per unit of risk. If you would invest  1,016  in Warner Bros Discovery on December 4, 2024 and sell it today you would earn a total of  93.00  from holding Warner Bros Discovery or generate 9.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Warner Bros Discovery  vs.  Big Screen Entertainment

Warner Bros Discovery

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Warner Bros may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Big Screen Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Screen Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating technical and fundamental indicators, Big Screen may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Warner Bros and Big Screen

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

The idea behind Warner Bros Discovery and Big Screen Entertainment 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.