Correlation Between Westlake Chemical and Warner Music
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical 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 Westlake Chemical and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and Warner Music Group, you can compare the effects of market volatilities on Westlake Chemical 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 Westlake Chemical with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Warner Music.
Diversification Opportunities for Westlake Chemical and Warner Music
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westlake and Warner is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical i.e., Westlake Chemical and Warner Music go up and down completely randomly.
Pair Corralation between Westlake Chemical and Warner Music
Assuming the 90 days horizon Westlake Chemical is expected to generate 6.12 times less return on investment than Warner Music. But when comparing it to its historical volatility, Westlake Chemical is 1.31 times less risky than Warner Music. It trades about 0.02 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.09 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 109.00 from holding Warner Music Group or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Westlake Chemical vs. Warner Music Group
Performance |
| Timeline |
| Westlake Chemical |
| Warner Music Group |
Westlake Chemical and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and Warner Music
The main advantage of trading using opposite Westlake Chemical and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical 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.| Westlake Chemical vs. PENN NATL GAMING | Westlake Chemical vs. GigaMedia | Westlake Chemical vs. HOCHSCHILD MINING | Westlake Chemical vs. TSOGO SUN GAMING |
| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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