Correlation Between Bausch Lomb and Warner Music
Can any of the company-specific risk be diversified away by investing in both Bausch Lomb 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 Bausch Lomb and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bausch Lomb Corp and Warner Music Group, you can compare the effects of market volatilities on Bausch Lomb 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 Bausch Lomb with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Lomb and Warner Music.
Diversification Opportunities for Bausch Lomb and Warner Music
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bausch and Warner is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Lomb Corp 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 Bausch Lomb 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 Bausch Lomb Corp 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 Bausch Lomb i.e., Bausch Lomb and Warner Music go up and down completely randomly.
Pair Corralation between Bausch Lomb and Warner Music
Given the investment horizon of 90 days Bausch Lomb Corp is expected to under-perform the Warner Music. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Lomb Corp is 1.2 times less risky than Warner Music. The stock trades about -0.09 of its potential returns per unit of risk. The Warner Music Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,204 in Warner Music Group on September 2, 2024 and sell it today you would earn a total of 48.00 from holding Warner Music Group or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Lomb Corp vs. Warner Music Group
Performance |
| Timeline |
| Bausch Lomb Corp |
| Warner Music Group |
Bausch Lomb and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Lomb and Warner Music
The main advantage of trading using opposite Bausch Lomb and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Lomb 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.| Bausch Lomb vs. The Cooper Companies, | Bausch Lomb vs. ICU Medical | Bausch Lomb vs. Hologic | Bausch Lomb vs. Becton Dickinson and |
| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |