Correlation Between Ares Management and Warner Music
Can any of the company-specific risk be diversified away by investing in both Ares Management and Warner Music 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 Ares Management and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management and Warner Music Group, you can compare the effects of market volatilities on Ares Management and Warner Music 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 Ares Management with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Warner Music.
Diversification Opportunities for Ares Management and Warner Music
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ares and Warner is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group and Ares Management 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 Ares Management are associated (or correlated) with Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Ares Management i.e., Ares Management and Warner Music go up and down completely randomly.
Pair Corralation between Ares Management and Warner Music
Assuming the 90 days trading horizon Ares Management is expected to generate 0.93 times more return on investment than Warner Music. However, Ares Management is 1.08 times less risky than Warner Music. It trades about 0.13 of its potential returns per unit of risk. Warner Music Group is currently generating about -0.23 per unit of risk. If you would invest 10,679 in Ares Management on October 11, 2024 and sell it today you would earn a total of 439.00 from holding Ares Management or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management vs. Warner Music Group
Performance |
| Timeline |
| Ares Management |
| Warner Music Group |
Ares Management and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Warner Music
The main advantage of trading using opposite Ares Management and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Ares Management vs. Warner Music Group | Ares Management vs. CVS Health | Ares Management vs. Live Nation Entertainment, | Ares Management vs. Fidelity National Information |
| Warner Music vs. Unity Software | Warner Music vs. Clover Health Investments, | Warner Music vs. Verizon Communications | Warner Music vs. Charter Communications |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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