Correlation Between Esperion Therapeutics and Warner Music

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Can any of the company-specific risk be diversified away by investing in both Esperion Therapeutics 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 Esperion Therapeutics and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Esperion Therapeutics and Warner Music Group, you can compare the effects of market volatilities on Esperion Therapeutics 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 Esperion Therapeutics with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esperion Therapeutics and Warner Music.

Diversification Opportunities for Esperion Therapeutics and Warner Music

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Esperion and Warner is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics 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 Esperion Therapeutics 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 Esperion Therapeutics 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 Esperion Therapeutics i.e., Esperion Therapeutics and Warner Music go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Warner Music

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 3.21 times more return on investment than Warner Music. However, Esperion Therapeutics is 3.21 times more volatile than Warner Music Group. It trades about 0.06 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.06 per unit of risk. If you would invest  135.00  in Esperion Therapeutics on August 31, 2024 and sell it today you would earn a total of  145.00  from holding Esperion Therapeutics or generate 107.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Esperion Therapeutics  vs.  Warner Music Group

 Performance 
       Timeline  
Esperion Therapeutics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.
Warner Music Group 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Warner Music reported solid returns over the last few months and may actually be approaching a breakup point.

Esperion Therapeutics and Warner Music Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Esperion Therapeutics and Warner Music

The main advantage of trading using opposite Esperion Therapeutics and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esperion Therapeutics 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 Esperion Therapeutics 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.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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