Correlation Between Warner Music and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both Warner Music and Occidental Petroleum 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 Occidental Petroleum 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 Occidental Petroleum, you can compare the effects of market volatilities on Warner Music and Occidental Petroleum 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 Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Occidental Petroleum.
Diversification Opportunities for Warner Music and Occidental Petroleum
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and Occidental is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Warner Music i.e., Warner Music and Occidental Petroleum go up and down completely randomly.
Pair Corralation between Warner Music and Occidental Petroleum
Assuming the 90 days trading horizon Warner Music Group is expected to under-perform the Occidental Petroleum. In addition to that, Warner Music is 1.72 times more volatile than Occidental Petroleum. It trades about -0.22 of its total potential returns per unit of risk. Occidental Petroleum is currently generating about 0.43 per unit of volatility. If you would invest 4,790 in Occidental Petroleum on October 14, 2024 and sell it today you would earn a total of 440.00 from holding Occidental Petroleum or generate 9.19% 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. Occidental Petroleum
Performance |
| Timeline |
| Warner Music Group |
| Occidental Petroleum |
Warner Music and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Occidental Petroleum
The main advantage of trading using opposite Warner Music and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Occidental Petroleum 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 Occidental Petroleum will offset losses from the drop in Occidental Petroleum's long position.| Warner Music vs. Cognizant Technology Solutions | Warner Music vs. Costco Wholesale | Warner Music vs. Monster Beverage | Warner Music vs. BIONTECH SE DRN |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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