Correlation Between Warner Music and Best Buy
Can any of the company-specific risk be diversified away by investing in both Warner Music and Best Buy 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 Best Buy 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 Best Buy Co, you can compare the effects of market volatilities on Warner Music and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Best Buy.
Diversification Opportunities for Warner Music and Best Buy
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Warner and Best is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Warner Music i.e., Warner Music and Best Buy go up and down completely randomly.
Pair Corralation between Warner Music and Best Buy
Assuming the 90 days trading horizon Warner Music Group is expected to generate 1.01 times more return on investment than Best Buy. However, Warner Music is 1.01 times more volatile than Best Buy Co. It trades about 0.1 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.16 per unit of risk. If you would invest 4,600 in Warner Music Group on August 31, 2024 and sell it today you would earn a total of 140.00 from holding Warner Music Group or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Best Buy Co
Performance |
| Timeline |
| Warner Music Group |
| Best Buy |
Warner Music and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Best Buy
The main advantage of trading using opposite Warner Music and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| Warner Music vs. Intelbras SA | Warner Music vs. Neogrid Participaes SA | Warner Music vs. Mliuz SA | Warner Music vs. Locaweb Servios de |
| Best Buy vs. Warner Music Group | Best Buy vs. American Airlines Group | Best Buy vs. New Oriental Education | Best Buy vs. Tyson Foods |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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