Correlation Between Canadian Utilities and Warner Music
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Warner Music Group, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Warner Music.
Diversification Opportunities for Canadian Utilities and Warner Music
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and Warner is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited 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 Canadian Utilities 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and Warner Music go up and down completely randomly.
Pair Corralation between Canadian Utilities and Warner Music
Assuming the 90 days horizon Canadian Utilities Limited is expected to under-perform the Warner Music. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Utilities Limited is 2.75 times less risky than Warner Music. The stock trades about -0.23 of its potential returns per unit of risk. The Warner Music Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,995 in Warner Music Group on November 7, 2024 and sell it today you would earn a total of 135.00 from holding Warner Music Group or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Warner Music Group
Performance |
| Timeline |
| Canadian Utilities |
| Warner Music Group |
Canadian Utilities and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Warner Music
The main advantage of trading using opposite Canadian Utilities and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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.| Canadian Utilities vs. Kingdee International Software | Canadian Utilities vs. Scottish Mortgage Investment | Canadian Utilities vs. Magic Software Enterprises | Canadian Utilities vs. Guidewire Software |
| Warner Music vs. AOI Electronics Co | Warner Music vs. TELECOM ITALRISP ADR10 | Warner Music vs. Schweizer Electronic AG | Warner Music vs. Rocket Internet SE |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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