Correlation Between Warner Music and FREEPORT

Can any of the company-specific risk be diversified away by investing in both Warner Music and FREEPORT 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 FREEPORT 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 FREEPORT MCMORAN INC 4375, you can compare the effects of market volatilities on Warner Music and FREEPORT 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 FREEPORT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and FREEPORT.

Diversification Opportunities for Warner Music and FREEPORT

0.23

Correlation Coefficient

Warner Music  FREEPORT

Modest diversification

The 3 months correlation between Warner and FREEPORT is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and FREEPORT MCMORAN INC 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREEPORT MCMORAN INC 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 FREEPORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREEPORT MCMORAN INC has no effect on the direction of Warner Music i.e., Warner Music and FREEPORT go up and down completely randomly.

Pair Corralation between Warner Music and FREEPORT

Considering the 90-day investment horizon Warner Music Group is expected to generate 2.01 times more return on investment than FREEPORT. However, Warner Music is 2.01 times more volatile than FREEPORT MCMORAN INC 4375. It trades about 0.03 of its potential returns per unit of risk. FREEPORT MCMORAN INC 4375 is currently generating about 0.0 per unit of risk. If you would invest  2,745  in Warner Music Group on October 3, 2024 and sell it today you would earn a total of  355.00  from holding Warner Music Group or generate 12.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.99%
Values	Daily Returns

Warner Music Group  vs.  FREEPORT MCMORAN INC 4375

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

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 4375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FREEPORT MCMORAN INC 4375 investors.

Pair Trading with Warner Music and FREEPORT

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

The idea behind Warner Music Group and FREEPORT MCMORAN INC 4375 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 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..