Correlation Between Madison Square and Warner Music
Can any of the company-specific risk be diversified away by investing in both Madison Square 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 Madison Square and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madison Square Garden and Warner Music Group, you can compare the effects of market volatilities on Madison Square 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 Madison Square with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Square and Warner Music.
Diversification Opportunities for Madison Square and Warner Music
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Madison and Warner is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden 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 Madison Square 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 Madison Square Garden 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 Madison Square i.e., Madison Square and Warner Music go up and down completely randomly.
Pair Corralation between Madison Square and Warner Music
Given the investment horizon of 90 days Madison Square Garden is expected to generate 0.7 times more return on investment than Warner Music. However, Madison Square Garden is 1.43 times less risky than Warner Music. It trades about 0.15 of its potential returns per unit of risk. Warner Music Group is currently generating about -0.03 per unit of risk. If you would invest 21,888 in Madison Square Garden on August 23, 2024 and sell it today you would earn a total of 961.00 from holding Madison Square Garden or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Square Garden vs. Warner Music Group
Performance |
| Timeline |
| Madison Square Garden |
| Warner Music Group |
Madison Square and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Square and Warner Music
The main advantage of trading using opposite Madison Square and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Square 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.| Madison Square vs. Atlanta Braves Holdings, | Madison Square vs. Liberty Media | Madison Square vs. Liberty Media | Madison Square vs. Atlanta Braves Holdings, |
| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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