Correlation Between Warner Music and Altice USA

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

Diversification Opportunities for Warner Music and Altice USA

0.2

Correlation Coefficient

Warner Music  Altice USA

Modest diversification

The 3 months correlation between Warner and Altice is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Altice USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altice USA 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 Altice USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altice USA has no effect on the direction of Warner Music i.e., Warner Music and Altice USA go up and down completely randomly.

Pair Corralation between Warner Music and Altice USA

Considering the 90-day investment horizon Warner Music is expected to generate 3.93 times less return on investment than Altice USA. But when comparing it to its historical volatility, Warner Music Group is 1.95 times less risky than Altice USA. It trades about 0.05 of its potential returns per unit of risk. Altice USA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  234.00  in Altice USA on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Altice USA or generate 20.09% return on investment over 90 days.

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

Warner Music Group  vs.  Altice USA

Warner Music Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Altice USA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altice USA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Altice USA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Music and Altice USA

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

The idea behind Warner Music Group and Altice USA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.