Correlation Between News Corp and Warner Music
Can any of the company-specific risk be diversified away by investing in both News 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 News 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 News Corp A and Warner Music Group, you can compare the effects of market volatilities on News 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 News Corp with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of News Corp and Warner Music.
Diversification Opportunities for News Corp and Warner Music
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between News and Warner is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding News Corp A 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 News 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 News Corp A 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 News Corp i.e., News Corp and Warner Music go up and down completely randomly.
Pair Corralation between News Corp and Warner Music
Given the investment horizon of 90 days News Corp A is expected to generate 0.83 times more return on investment than Warner Music. However, News Corp A is 1.21 times less risky than Warner Music. It trades about 0.05 of its potential returns per unit of risk. Warner Music Group is currently generating about -0.01 per unit of risk. If you would invest 1,979 in News Corp A on October 20, 2024 and sell it today you would earn a total of 764.00 from holding News Corp A or generate 38.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
News Corp A vs. Warner Music Group
Performance |
| Timeline |
| News Corp A |
| Warner Music Group |
News Corp and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with News Corp and Warner Music
The main advantage of trading using opposite News Corp and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News 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.| News Corp vs. Marcus | News Corp vs. Liberty Media | News Corp vs. Warner Music Group | News Corp vs. Fox Corp Class |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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