Correlation Between Warner Bros and HeadsUp Entertainment

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

Diversification Opportunities for Warner Bros and HeadsUp Entertainment

-0.46

Correlation Coefficient

Warner Bros  HeadsUp Entertainment

Very good diversification

The 3 months correlation between Warner and HeadsUp is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and HeadsUp Entertainment Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeadsUp 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 HeadsUp Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeadsUp Entertainment has no effect on the direction of Warner Bros i.e., Warner Bros and HeadsUp Entertainment go up and down completely randomly.

Pair Corralation between Warner Bros and HeadsUp Entertainment

Considering the 90-day investment horizon Warner Bros is expected to generate 3.16 times less return on investment than HeadsUp Entertainment. But when comparing it to its historical volatility, Warner Bros Discovery is 4.32 times less risky than HeadsUp Entertainment. It trades about 0.11 of its potential returns per unit of risk. HeadsUp Entertainment International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.53  in HeadsUp Entertainment International on September 23, 2024 and sell it today you would earn a total of  0.13  from holding HeadsUp Entertainment International or generate 24.53% 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.  HeadsUp Entertainment Internat

Warner Bros Discovery

Risk-Adjusted Performance

10 of 100

OK

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 unsteady fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

HeadsUp Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HeadsUp Entertainment International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Warner Bros and HeadsUp Entertainment

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

The idea behind Warner Bros Discovery and HeadsUp Entertainment International 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.