Correlation Between Warner Music and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both Warner Music and NYSE Composite 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 NYSE Composite 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 NYSE Composite, you can compare the effects of market volatilities on Warner Music and NYSE Composite 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 NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and NYSE Composite.
Diversification Opportunities for Warner Music and NYSE Composite
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and NYSE is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite 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 NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of Warner Music i.e., Warner Music and NYSE Composite go up and down completely randomly.
Pair Corralation between Warner Music and NYSE Composite
Considering the 90-day investment horizon Warner Music Group is expected to under-perform the NYSE Composite. In addition to that, Warner Music is 3.6 times more volatile than NYSE Composite. It trades about -0.08 of its total potential returns per unit of risk. NYSE Composite is currently generating about 0.08 per unit of volatility. If you would invest 1,757,369 in NYSE Composite on February 28, 2024 and sell it today you would earn a total of 53,691 from holding NYSE Composite or generate 3.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Warner Music Group vs. NYSE Composite
Performance |
Timeline |
Warner Music and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |
Warner Music Group
Pair trading matchups for Warner Music
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with Warner Music and NYSE Composite
The main advantage of trading using opposite Warner Music and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.Warner Music vs. Anghami Warrants | Warner Music vs. Atlanta Braves Holdings | Warner Music vs. Color Star Technology | Warner Music vs. Core Main |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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