Correlation Between Warner Music and G2D Investments
Can any of the company-specific risk be diversified away by investing in both Warner Music and G2D Investments 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 G2D Investments 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 G2D Investments, you can compare the effects of market volatilities on Warner Music and G2D Investments 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 G2D Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and G2D Investments.
Diversification Opportunities for Warner Music and G2D Investments
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and G2D is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and G2D Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G2D Investments 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 G2D Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G2D Investments has no effect on the direction of Warner Music i.e., Warner Music and G2D Investments go up and down completely randomly.
Pair Corralation between Warner Music and G2D Investments
Assuming the 90 days trading horizon Warner Music Group is expected to generate 0.85 times more return on investment than G2D Investments. However, Warner Music Group is 1.18 times less risky than G2D Investments. It trades about 0.12 of its potential returns per unit of risk. G2D Investments is currently generating about -0.02 per unit of risk. If you would invest 4,579 in Warner Music Group on August 30, 2024 and sell it today you would earn a total of 161.00 from holding Warner Music Group or generate 3.52% 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. G2D Investments
Performance |
| Timeline |
| Warner Music Group |
| G2D Investments |
Warner Music and G2D Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and G2D Investments
The main advantage of trading using opposite Warner Music and G2D Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, G2D Investments 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 G2D Investments will offset losses from the drop in G2D Investments' long position.The idea behind Warner Music Group and G2D Investments pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| G2D Investments vs. Ameriprise Financial | G2D Investments vs. Bradespar SA | G2D Investments vs. Bradespar SA | G2D Investments vs. Habitat Ii |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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