Correlation Between Belden and Warner Music
Can any of the company-specific risk be diversified away by investing in both Belden 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 Belden and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Belden Inc and Warner Music Group, you can compare the effects of market volatilities on Belden 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 Belden with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Belden and Warner Music.
Diversification Opportunities for Belden and Warner Music
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Belden and Warner is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Belden Inc 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 Belden 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 Belden Inc 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 Belden i.e., Belden and Warner Music go up and down completely randomly.
Pair Corralation between Belden and Warner Music
Considering the 90-day investment horizon Belden Inc is expected to generate 1.45 times more return on investment than Warner Music. However, Belden is 1.45 times more volatile than Warner Music Group. It trades about 0.11 of its potential returns per unit of risk. Warner Music Group is currently generating about -0.07 per unit of risk. If you would invest 11,655 in Belden Inc on August 26, 2024 and sell it today you would earn a total of 697.00 from holding Belden Inc or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Belden Inc vs. Warner Music Group
Performance |
| Timeline |
| Belden Inc |
| Warner Music Group |
Belden and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Belden and Warner Music
The main advantage of trading using opposite Belden and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belden 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.The idea behind Belden Inc and Warner Music Group 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.| Warner Music vs. ADTRAN Inc | Warner Music vs. Belden Inc | Warner Music vs. ADC Therapeutics SA | Warner Music vs. Comtech Telecommunications Corp |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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