Correlation Between Warner Music and Apogee Enterprises

Can any of the company-specific risk be diversified away by investing in both Warner Music and Apogee Enterprises 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 Music and Apogee Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Warner Music Group and Apogee Enterprises, you can compare the effects of market volatilities on Warner Music and Apogee Enterprises 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 Music with a short position of Apogee Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Apogee Enterprises.

Diversification Opportunities for Warner Music and Apogee Enterprises

0.62

Correlation Coefficient

Warner Music  Apogee Enterprises

Poor diversification

The 3 months correlation between Warner and Apogee is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Apogee Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apogee Enterprises and Warner Music 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 Music Group are associated (or correlated) with Apogee Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apogee Enterprises has no effect on the direction of Warner Music i.e., Warner Music and Apogee Enterprises go up and down completely randomly.

Pair Corralation between Warner Music and Apogee Enterprises

Considering the 90-day investment horizon Warner Music Group is expected to generate 0.85 times more return on investment than Apogee Enterprises. However, Warner Music Group is 1.18 times less risky than Apogee Enterprises. It trades about -0.11 of its potential returns per unit of risk. Apogee Enterprises is currently generating about -0.48 per unit of risk. If you would invest  3,240  in Warner Music Group on September 27, 2024 and sell it today you would lose (100.00) from holding Warner Music Group or give up 3.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Warner Music Group  vs.  Apogee Enterprises

Warner Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Apogee Enterprises

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apogee Enterprises are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Apogee Enterprises may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Warner Music and Apogee Enterprises

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

The idea behind Warner Music Group and Apogee Enterprises 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.