Correlation Between Warner Music and JD
Can any of the company-specific risk be diversified away by investing in both Warner Music and JD 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 JD 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 JD Inc, you can compare the effects of market volatilities on Warner Music and JD 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 JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and JD.
Diversification Opportunities for Warner Music and JD
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and JD is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc has no effect on the direction of Warner Music i.e., Warner Music and JD go up and down completely randomly.
Pair Corralation between Warner Music and JD
Assuming the 90 days trading horizon Warner Music Group is expected to generate 0.41 times more return on investment than JD. However, Warner Music Group is 2.44 times less risky than JD. It trades about 0.14 of its potential returns per unit of risk. JD Inc is currently generating about -0.03 per unit of risk. If you would invest 4,637 in Warner Music Group on September 1, 2024 and sell it today you would earn a total of 201.00 from holding Warner Music Group or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Warner Music Group vs. JD Inc
Performance |
| Timeline |
| Warner Music Group |
| JD Inc |
Warner Music and JD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and JD
The main advantage of trading using opposite Warner Music and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, JD 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 JD will offset losses from the drop in JD'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 |
| JD vs. MAHLE Metal Leve | JD vs. METISA Metalrgica Timboense | JD vs. Zoom Video Communications | JD vs. Apartment Investment and |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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