Correlation Between Black Hills and Warner Music
Can any of the company-specific risk be diversified away by investing in both Black Hills 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 Black Hills and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Warner Music Group, you can compare the effects of market volatilities on Black Hills 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 Black Hills with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Warner Music.
Diversification Opportunities for Black Hills and Warner Music
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Black and Warner is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills 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 Black Hills 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 Black Hills 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 Black Hills i.e., Black Hills and Warner Music go up and down completely randomly.
Pair Corralation between Black Hills and Warner Music
Considering the 90-day investment horizon Black Hills is expected to generate 3.46 times less return on investment than Warner Music. But when comparing it to its historical volatility, Black Hills is 1.28 times less risky than Warner Music. It trades about 0.02 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,401 in Warner Music Group on August 31, 2024 and sell it today you would earn a total of 851.00 from holding Warner Music Group or generate 35.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Warner Music Group
Performance |
| Timeline |
| Black Hills |
| Warner Music Group |
Black Hills and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Warner Music
The main advantage of trading using opposite Black Hills and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills 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.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Warner Music vs. Roku Inc | Warner Music vs. AMC Entertainment Holdings | Warner Music vs. Paramount Global Class | Warner Music vs. Warner Bros Discovery |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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