Correlation Between CDW Corp and Warner Music
Can any of the company-specific risk be diversified away by investing in both CDW Corp 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 CDW Corp and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDW Corp and Warner Music Group, you can compare the effects of market volatilities on CDW Corp 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 CDW Corp with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and Warner Music.
Diversification Opportunities for CDW Corp and Warner Music
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CDW and Warner is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding CDW 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 CDW Corp 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 CDW 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 CDW Corp i.e., CDW Corp and Warner Music go up and down completely randomly.
Pair Corralation between CDW Corp and Warner Music
Considering the 90-day investment horizon CDW Corp is expected to under-perform the Warner Music. But the stock apears to be less risky and, when comparing its historical volatility, CDW Corp is 1.03 times less risky than Warner Music. The stock trades about -0.04 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 3,100 in Warner Music Group on September 14, 2024 and sell it today you would earn a total of 152.00 from holding Warner Music Group or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDW Corp vs. Warner Music Group
Performance |
| Timeline |
| CDW Corp |
| Warner Music Group |
CDW Corp and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDW Corp and Warner Music
The main advantage of trading using opposite CDW Corp and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW Corp 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.| CDW Corp vs. CACI International | CDW Corp vs. Jack Henry Associates | CDW Corp vs. Broadridge Financial Solutions | CDW Corp vs. ExlService Holdings |
| Warner Music vs. Liberty Media | Warner Music vs. Atlanta Braves Holdings, | Warner Music vs. News Corp B | Warner Music vs. News Corp A |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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