Correlation Between Sphere Entertainment and Warner Music
Can any of the company-specific risk be diversified away by investing in both Sphere Entertainment 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 Sphere Entertainment and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sphere Entertainment Co and Warner Music Group, you can compare the effects of market volatilities on Sphere Entertainment 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 Sphere Entertainment with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sphere Entertainment and Warner Music.
Diversification Opportunities for Sphere Entertainment and Warner Music
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sphere and Warner is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Warner Music go up and down completely randomly.
Pair Corralation between Sphere Entertainment and Warner Music
Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 1.67 times more return on investment than Warner Music. However, Sphere Entertainment is 1.67 times more volatile than Warner Music Group. It trades about 0.07 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 3,046 in Sphere Entertainment Co on November 9, 2024 and sell it today you would earn a total of 1,695 from holding Sphere Entertainment Co or generate 55.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sphere Entertainment Co vs. Warner Music Group
Performance |
| Timeline |
| Sphere Entertainment |
| Warner Music Group |
Sphere Entertainment and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sphere Entertainment and Warner Music
The main advantage of trading using opposite Sphere Entertainment and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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.| Sphere Entertainment vs. Boyd Gaming | Sphere Entertainment vs. Analog Devices | Sphere Entertainment vs. Summit Hotel Properties | Sphere Entertainment vs. Everspin Technologies |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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