Correlation Between Warner Music and Latamgrowth SPAC

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

Diversification Opportunities for Warner Music and Latamgrowth SPAC

-0.52

Correlation Coefficient

Warner Music  Latamgrowth SPAC

Excellent diversification

The 3 months correlation between Warner and Latamgrowth is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Latamgrowth SPAC Unit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latamgrowth SPAC Unit 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 Latamgrowth SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latamgrowth SPAC Unit has no effect on the direction of Warner Music i.e., Warner Music and Latamgrowth SPAC go up and down completely randomly.

Pair Corralation between Warner Music and Latamgrowth SPAC

Considering the 90-day investment horizon Warner Music Group is expected to under-perform the Latamgrowth SPAC. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 3.17 times less risky than Latamgrowth SPAC. The stock trades about -0.06 of its potential returns per unit of risk. The Latamgrowth SPAC Unit is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Latamgrowth SPAC Unit on October 26, 2024 and sell it today you would lose (11.00) from holding Latamgrowth SPAC Unit or give up 0.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.67%
Values	Daily Returns

Warner Music Group  vs.  Latamgrowth SPAC Unit

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Latamgrowth SPAC Unit

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Latamgrowth SPAC Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady technical and fundamental indicators, Latamgrowth SPAC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Warner Music and Latamgrowth SPAC

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

The idea behind Warner Music Group and Latamgrowth SPAC Unit 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.