Correlation Between Warner Music and Seagate Technology
Can any of the company-specific risk be diversified away by investing in both Warner Music and Seagate Technology 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 Seagate Technology 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 Seagate Technology Holdings, you can compare the effects of market volatilities on Warner Music and Seagate Technology 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 Seagate Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Seagate Technology.
Diversification Opportunities for Warner Music and Seagate Technology
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Warner and Seagate is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Seagate Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology 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 Seagate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seagate Technology has no effect on the direction of Warner Music i.e., Warner Music and Seagate Technology go up and down completely randomly.
Pair Corralation between Warner Music and Seagate Technology
Assuming the 90 days trading horizon Warner Music Group is expected to under-perform the Seagate Technology. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 1.48 times less risky than Seagate Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Seagate Technology Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 56,775 in Seagate Technology Holdings on October 26, 2024 and sell it today you would earn a total of 6,725 from holding Seagate Technology Holdings or generate 11.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Seagate Technology Holdings
Performance |
| Timeline |
| Warner Music Group |
| Seagate Technology |
Warner Music and Seagate Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Seagate Technology
The main advantage of trading using opposite Warner Music and Seagate Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Seagate Technology 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 Seagate Technology will offset losses from the drop in Seagate Technology's long position.| Warner Music vs. Medical Properties Trust, | Warner Music vs. United Rentals | Warner Music vs. Ares Management | Warner Music vs. Pentair plc |
| Seagate Technology vs. United States Steel | Seagate Technology vs. Spotify Technology SA | Seagate Technology vs. Warner Music Group | Seagate Technology vs. British American Tobacco |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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