Correlation Between Retail Estates and Warner Music
Can any of the company-specific risk be diversified away by investing in both Retail Estates 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 Retail Estates and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Estates NV and Warner Music Group, you can compare the effects of market volatilities on Retail Estates 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 Retail Estates with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and Warner Music.
Diversification Opportunities for Retail Estates and Warner Music
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Retail and Warner is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV 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 Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and Warner Music go up and down completely randomly.
Pair Corralation between Retail Estates and Warner Music
Assuming the 90 days horizon Retail Estates NV is expected to under-perform the Warner Music. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 2.07 times less risky than Warner Music. The stock trades about -0.22 of its potential returns per unit of risk. The Warner Music Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,923 in Warner Music Group on September 1, 2024 and sell it today you would earn a total of 100.00 from holding Warner Music Group or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retail Estates NV vs. Warner Music Group
Performance |
| Timeline |
| Retail Estates NV |
| Warner Music Group |
Retail Estates and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retail Estates and Warner Music
The main advantage of trading using opposite Retail Estates and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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.| Retail Estates vs. Superior Plus Corp | Retail Estates vs. NMI Holdings | Retail Estates vs. Origin Agritech | Retail Estates vs. SIVERS SEMICONDUCTORS AB |
| Warner Music vs. Wayside Technology Group | Warner Music vs. PLAY2CHILL SA ZY | Warner Music vs. VARIOUS EATERIES LS | Warner Music vs. DXC Technology Co |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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