Correlation Between Warner Music and Luduson G

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

Diversification Opportunities for Warner Music and Luduson G

-0.31

Correlation Coefficient

Warner Music  Luduson G

Very good diversification

The 3 months correlation between Warner and Luduson is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Luduson G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luduson G 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 Luduson G. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luduson G has no effect on the direction of Warner Music i.e., Warner Music and Luduson G go up and down completely randomly.

Pair Corralation between Warner Music and Luduson G

Considering the 90-day investment horizon Warner Music is expected to generate 9.13 times less return on investment than Luduson G. But when comparing it to its historical volatility, Warner Music Group is 13.43 times less risky than Luduson G. It trades about 0.11 of its potential returns per unit of risk. Luduson G is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.46  in Luduson G on November 28, 2024 and sell it today you would lose (0.07) from holding Luduson G or give up 15.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Warner Music Group  vs.  Luduson G

Warner Music Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Luduson G

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Luduson G are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Luduson G displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Music and Luduson G

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

The idea behind Warner Music Group and Luduson G 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.