Correlation Between Air Transport and Warner Music
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and Warner Music Group, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Warner Music.
Diversification Opportunities for Air Transport and Warner Music
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Warner is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Warner Music go up and down completely randomly.
Pair Corralation between Air Transport and Warner Music
Assuming the 90 days horizon Air Transport is expected to generate 9.22 times less return on investment than Warner Music. In addition to that, Air Transport is 1.53 times more volatile than Warner Music Group. It trades about 0.0 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.01 per unit of volatility. If you would invest 3,058 in Warner Music Group on September 4, 2024 and sell it today you would earn a total of 18.00 from holding Warner Music Group or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Air Transport Services vs. Warner Music Group
Performance |
| Timeline |
| Air Transport Services |
| Warner Music Group |
Air Transport and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Warner Music
The main advantage of trading using opposite Air Transport and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. KINGBOARD CHEMICAL | Air Transport vs. American Eagle Outfitters | Air Transport vs. G III Apparel Group | Air Transport vs. WESTLAKE CHEMICAL |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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