Correlation Between Warner Music and Clover Health
Can any of the company-specific risk be diversified away by investing in both Warner Music and Clover Health 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 Clover Health 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 Clover Health Investments,, you can compare the effects of market volatilities on Warner Music and Clover Health 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 Clover Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Clover Health.
Diversification Opportunities for Warner Music and Clover Health
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Warner and Clover is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Clover Health Investments, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clover Health Invest 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 Clover Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clover Health Invest has no effect on the direction of Warner Music i.e., Warner Music and Clover Health go up and down completely randomly.
Pair Corralation between Warner Music and Clover Health
Assuming the 90 days trading horizon Warner Music Group is expected to under-perform the Clover Health. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 1.48 times less risky than Clover Health. The stock trades about -0.28 of its potential returns per unit of risk. The Clover Health Investments, is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,950 in Clover Health Investments, on October 16, 2024 and sell it today you would earn a total of 330.00 from holding Clover Health Investments, or generate 16.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Clover Health Investments,
Performance |
| Timeline |
| Warner Music Group |
| Clover Health Invest |
Warner Music and Clover Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Clover Health
The main advantage of trading using opposite Warner Music and Clover Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Clover Health 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 Clover Health will offset losses from the drop in Clover Health's long position.| Warner Music vs. Iron Mountain Incorporated | Warner Music vs. GP Investments | Warner Music vs. New Oriental Education | Warner Music vs. Charter Communications |
| Clover Health vs. Unity Software | Clover Health vs. Cognizant Technology Solutions | Clover Health vs. Paycom Software | Clover Health vs. Pentair plc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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