Correlation Between Warner Bros and Pop Culture

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

Diversification Opportunities for Warner Bros and Pop Culture

-0.44

Correlation Coefficient

Warner Bros  Pop Culture

Very good diversification

The 3 months correlation between Warner and Pop is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Pop Culture Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pop Culture Group 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 Pop Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pop Culture Group has no effect on the direction of Warner Bros i.e., Warner Bros and Pop Culture go up and down completely randomly.

Pair Corralation between Warner Bros and Pop Culture

Considering the 90-day investment horizon Warner Bros Discovery is expected to generate 0.35 times more return on investment than Pop Culture. However, Warner Bros Discovery is 2.82 times less risky than Pop Culture. It trades about 0.05 of its potential returns per unit of risk. Pop Culture Group is currently generating about 0.02 per unit of risk. If you would invest  834.00  in Warner Bros Discovery on October 9, 2024 and sell it today you would earn a total of  217.00  from holding Warner Bros Discovery or generate 26.02% return on investment over 90 days.

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

Warner Bros Discovery  vs.  Pop Culture Group

Warner Bros Discovery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 13 (%) 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.

Pop Culture Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pop Culture Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pop Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Bros and Pop Culture

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

The idea behind Warner Bros Discovery and Pop Culture Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.