Correlation Between Warner Music and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Warner Music and Alibaba Group 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 Warner Music and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Warner Music Group and Alibaba Group Holding, you can compare the effects of market volatilities on Warner Music and Alibaba Group 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 Warner Music with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Alibaba Group.
Diversification Opportunities for Warner Music and Alibaba Group
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Warner and Alibaba is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding and Warner Music 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 Warner Music Group are associated (or correlated) with Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Warner Music i.e., Warner Music and Alibaba Group go up and down completely randomly.
Pair Corralation between Warner Music and Alibaba Group
Assuming the 90 days trading horizon Warner Music Group is expected to under-perform the Alibaba Group. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 1.37 times less risky than Alibaba Group. The stock trades about -0.04 of its potential returns per unit of risk. The Alibaba Group Holding is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,871 in Alibaba Group Holding on November 5, 2024 and sell it today you would earn a total of 197.00 from holding Alibaba Group Holding or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Alibaba Group Holding
Performance |
| Timeline |
| Warner Music Group |
| Alibaba Group Holding |
Warner Music and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Alibaba Group
The main advantage of trading using opposite Warner Music and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Warner Music vs. Multilaser Industrial SA | Warner Music vs. Beyond Meat | Warner Music vs. Tyson Foods | Warner Music vs. Chunghwa Telecom Co, |
| Alibaba Group vs. Synchrony Financial | Alibaba Group vs. Teladoc Health | Alibaba Group vs. Healthpeak Properties | Alibaba Group vs. Elevance Health, |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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