Correlation Between Warner Bros and H M

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

Diversification Opportunities for Warner Bros and H M

0.6

Correlation Coefficient

Warner Bros  H M

Poor diversification

The 3 months correlation between Warner and HMRZF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes 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 H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of Warner Bros i.e., Warner Bros and H M go up and down completely randomly.

Pair Corralation between Warner Bros and H M

Considering the 90-day investment horizon Warner Bros is expected to generate 1.26 times less return on investment than H M. In addition to that, Warner Bros is 1.67 times more volatile than H M Hennes. It trades about 0.01 of its total potential returns per unit of risk. H M Hennes is currently generating about 0.01 per unit of volatility. If you would invest  1,319  in H M Hennes on December 28, 2024 and sell it today you would earn a total of  4.00  from holding H M Hennes or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Warner Bros Discovery  vs.  H M Hennes

Warner Bros Discovery

Risk-Adjusted Performance

Insignificant

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.

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H M is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Warner Bros and H M

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

The idea behind Warner Bros Discovery and H M Hennes 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 Commodity Directory module to find actively traded commodities issued by global exchanges.