Correlation Between Warner Music and YY Group

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

Diversification Opportunities for Warner Music and YY Group

0.36

Correlation Coefficient

Warner Music  YY Group

Weak diversification

The 3 months correlation between Warner and YYGH is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and YY Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YY Group Holding 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 YY Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YY Group Holding has no effect on the direction of Warner Music i.e., Warner Music and YY Group go up and down completely randomly.

Pair Corralation between Warner Music and YY Group

Considering the 90-day investment horizon Warner Music Group is expected to under-perform the YY Group. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 2.2 times less risky than YY Group. The stock trades about -0.05 of its potential returns per unit of risk. The YY Group Holding is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  181.00  in YY Group Holding on October 7, 2024 and sell it today you would lose (4.00) from holding YY Group Holding or give up 2.21% of portfolio value over 90 days.

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

Warner Music Group  vs.  YY Group Holding

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

YY Group Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in YY Group Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical and fundamental indicators, YY Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Music and YY Group

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

The idea behind Warner Music Group and YY Group Holding 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.