Correlation Between SPARTAN STORES and Warner Music
Can any of the company-specific risk be diversified away by investing in both SPARTAN STORES 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 SPARTAN STORES and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPARTAN STORES and Warner Music Group, you can compare the effects of market volatilities on SPARTAN STORES 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 SPARTAN STORES with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPARTAN STORES and Warner Music.
Diversification Opportunities for SPARTAN STORES and Warner Music
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPARTAN and Warner is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES i.e., SPARTAN STORES and Warner Music go up and down completely randomly.
Pair Corralation between SPARTAN STORES and Warner Music
Assuming the 90 days trading horizon SPARTAN STORES is expected to generate 3.01 times less return on investment than Warner Music. In addition to that, SPARTAN STORES is 1.04 times more volatile than Warner Music Group. It trades about 0.01 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.02 per unit of volatility. If you would invest 2,845 in Warner Music Group on December 13, 2024 and sell it today you would earn a total of 304.00 from holding Warner Music Group or generate 10.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPARTAN STORES vs. Warner Music Group
Performance |
| Timeline |
| SPARTAN STORES |
| Warner Music Group |
SPARTAN STORES and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPARTAN STORES and Warner Music
The main advantage of trading using opposite SPARTAN STORES and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES 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.| SPARTAN STORES vs. FANDIFI TECHNOLOGY P | ||
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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