Correlation Between Warner Music and 629377CL4

Can any of the company-specific risk be diversified away by investing in both Warner Music and 629377CL4 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 629377CL4 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 US629377CL46, you can compare the effects of market volatilities on Warner Music and 629377CL4 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 629377CL4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and 629377CL4.

Diversification Opportunities for Warner Music and 629377CL4

-0.13

Correlation Coefficient

Warner Music  629377CL4

Good diversification

The 3 months correlation between Warner and 629377CL4 is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and US629377CL46 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US629377CL46 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 629377CL4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US629377CL46 has no effect on the direction of Warner Music i.e., Warner Music and 629377CL4 go up and down completely randomly.

Pair Corralation between Warner Music and 629377CL4

Considering the 90-day investment horizon Warner Music Group is expected to generate 0.63 times more return on investment than 629377CL4. However, Warner Music Group is 1.59 times less risky than 629377CL4. It trades about 0.02 of its potential returns per unit of risk. US629377CL46 is currently generating about -0.03 per unit of risk. If you would invest  3,075  in Warner Music Group on September 23, 2024 and sell it today you would earn a total of  41.00  from holding Warner Music Group or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.46%
Values	Daily Returns

Warner Music Group  vs.  US629377CL46

Warner Music Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

US629377CL46

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US629377CL46 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 629377CL4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Warner Music and 629377CL4

The main advantage of trading using opposite Warner Music and 629377CL4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, 629377CL4 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 629377CL4 will offset losses from the drop in 629377CL4's long position.

The idea behind Warner Music Group and US629377CL46 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.