Correlation Between HEALTHSTREAM (HL5SG) and Warner Music
Can any of the company-specific risk be diversified away by investing in both HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HEALTHSTREAM and Warner Music Group, you can compare the effects of market volatilities on HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEALTHSTREAM (HL5SG) and Warner Music.
Diversification Opportunities for HEALTHSTREAM (HL5SG) and Warner Music
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between HEALTHSTREAM and Warner is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM 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 HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM 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 HEALTHSTREAM (HL5SG) i.e., HEALTHSTREAM (HL5SG) and Warner Music go up and down completely randomly.
Pair Corralation between HEALTHSTREAM (HL5SG) and Warner Music
Assuming the 90 days trading horizon HEALTHSTREAM (HL5SG) is expected to generate 1.51 times less return on investment than Warner Music. But when comparing it to its historical volatility, HEALTHSTREAM is 2.05 times less risky than Warner Music. It trades about 0.12 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.09 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HEALTHSTREAM vs. Warner Music Group
Performance |
| Timeline |
| HEALTHSTREAM (HL5SG) |
| Warner Music Group |
HEALTHSTREAM (HL5SG) and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HEALTHSTREAM (HL5SG) and Warner Music
The main advantage of trading using opposite HEALTHSTREAM (HL5SG) and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEALTHSTREAM (HL5SG) 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.| HEALTHSTREAM (HL5SG) vs. CHIBA BANK | HEALTHSTREAM (HL5SG) vs. China Communications Services | HEALTHSTREAM (HL5SG) vs. Carnegie Clean Energy | HEALTHSTREAM (HL5SG) vs. TELECOM ITALRISP ADR10 |
| Warner Music vs. Fevertree Drinks PLC | Warner Music vs. GEELY AUTOMOBILE | Warner Music vs. Cars Inc | Warner Music vs. PLANT VEDA FOODS |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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