Correlation Between Warner Music and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Warner Music and Nasdaq 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 Nasdaq 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 Nasdaq Inc, you can compare the effects of market volatilities on Warner Music and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Nasdaq.
Diversification Opportunities for Warner Music and Nasdaq
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Warner and Nasdaq is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Warner Music i.e., Warner Music and Nasdaq go up and down completely randomly.
Pair Corralation between Warner Music and Nasdaq
Assuming the 90 days trading horizon Warner Music is expected to generate 2.26 times less return on investment than Nasdaq. In addition to that, Warner Music is 1.26 times more volatile than Nasdaq Inc. It trades about 0.06 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.17 per unit of volatility. If you would invest 12,931 in Nasdaq Inc on September 15, 2024 and sell it today you would earn a total of 11,309 from holding Nasdaq Inc or generate 87.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.53% |
| Values | Daily Returns |
Warner Music Group vs. Nasdaq Inc
Performance |
| Timeline |
| Warner Music Group |
| Nasdaq Inc |
Warner Music and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Nasdaq
The main advantage of trading using opposite Warner Music and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.| Warner Music vs. Marvell Technology | Warner Music vs. British American Tobacco | Warner Music vs. Waste Management | Warner Music vs. Extra Space Storage |
| Nasdaq vs. Warner Music Group | Nasdaq vs. United Rentals | Nasdaq vs. United Airlines Holdings | Nasdaq vs. G2D Investments |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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