Correlation Between Warner Bros and Fox Corp

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

Diversification Opportunities for Warner Bros and Fox Corp

0.13

Correlation Coefficient

Warner Bros  Fox Corp

Average diversification

The 3 months correlation between Warner and Fox is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Fox Corp Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fox Corp Class 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 Fox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fox Corp Class has no effect on the direction of Warner Bros i.e., Warner Bros and Fox Corp go up and down completely randomly.

Pair Corralation between Warner Bros and Fox Corp

Considering the 90-day investment horizon Warner Bros Discovery is expected to under-perform the Fox Corp. In addition to that, Warner Bros is 1.9 times more volatile than Fox Corp Class. It trades about -0.04 of its total potential returns per unit of risk. Fox Corp Class is currently generating about 0.07 per unit of volatility. If you would invest  4,623  in Fox Corp Class on December 17, 2024 and sell it today you would earn a total of  244.00  from holding Fox Corp Class or generate 5.28% 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.  Fox Corp Class

Warner Bros Discovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Warner Bros Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Warner Bros is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fox Corp Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fox Corp Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fox Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Warner Bros and Fox Corp

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

The idea behind Warner Bros Discovery and Fox Corp Class 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.