Correlation Between Warner Bros and Roku

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

Diversification Opportunities for Warner Bros and Roku

0.1

Correlation Coefficient

Warner Bros  Roku

Average diversification

The 3 months correlation between Warner and Roku is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc 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 Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Warner Bros i.e., Warner Bros and Roku go up and down completely randomly.

Pair Corralation between Warner Bros and Roku

Considering the 90-day investment horizon Warner Bros Discovery is expected to generate 0.66 times more return on investment than Roku. However, Warner Bros Discovery is 1.52 times less risky than Roku. It trades about 0.04 of its potential returns per unit of risk. Roku Inc is currently generating about 0.03 per unit of risk. If you would invest  1,051  in Warner Bros Discovery on December 28, 2024 and sell it today you would earn a total of  52.00  from holding Warner Bros Discovery or generate 4.95% 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.  Roku Inc

Warner Bros Discovery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 3 (%) 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.

Roku Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Roku may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Warner Bros and Roku

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

The idea behind Warner Bros Discovery and Roku Inc 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..