Correlation Between Automatic Data and Warner Music
Can any of the company-specific risk be diversified away by investing in both Automatic Data 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 Automatic Data and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and Warner Music Group, you can compare the effects of market volatilities on Automatic Data 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 Automatic Data with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Warner Music.
Diversification Opportunities for Automatic Data and Warner Music
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Automatic and Warner is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing 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 Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and Warner Music go up and down completely randomly.
Pair Corralation between Automatic Data and Warner Music
Assuming the 90 days horizon Automatic Data Processing is expected to under-perform the Warner Music. But the stock apears to be less risky and, when comparing its historical volatility, Automatic Data Processing is 2.18 times less risky than Warner Music. The stock trades about -0.2 of its potential returns per unit of risk. The Warner Music Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,057 in Warner Music Group on September 13, 2024 and sell it today you would lose (44.00) from holding Warner Music Group or give up 1.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Warner Music Group
Performance |
| Timeline |
| Automatic Data Processing |
| Warner Music Group |
Automatic Data and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Warner Music
The main advantage of trading using opposite Automatic Data and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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.| Automatic Data vs. Paychex | Automatic Data vs. Superior Plus Corp | Automatic Data vs. SIVERS SEMICONDUCTORS AB | Automatic Data vs. NorAm Drilling AS |
| Warner Music vs. The Walt Disney | Warner Music vs. Charter Communications | Warner Music vs. Superior Plus Corp | Warner Music vs. SIVERS SEMICONDUCTORS AB |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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