Correlation Between Warner Music and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Warner Music and Banco Santander 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 Banco Santander 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 Banco Santander SA, you can compare the effects of market volatilities on Warner Music and Banco Santander 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 Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Banco Santander.
Diversification Opportunities for Warner Music and Banco Santander
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Warner and Banco is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Warner Music i.e., Warner Music and Banco Santander go up and down completely randomly.
Pair Corralation between Warner Music and Banco Santander
Assuming the 90 days trading horizon Warner Music Group is expected to generate 1.43 times more return on investment than Banco Santander. However, Warner Music is 1.43 times more volatile than Banco Santander SA. It trades about 0.08 of its potential returns per unit of risk. Banco Santander SA is currently generating about -0.03 per unit of risk. If you would invest 2,947 in Warner Music Group on August 31, 2024 and sell it today you would earn a total of 1,891 from holding Warner Music Group or generate 64.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 96.26% |
| Values | Daily Returns |
Warner Music Group vs. Banco Santander SA
Performance |
| Timeline |
| Warner Music Group |
| Banco Santander SA |
Warner Music and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Banco Santander
The main advantage of trading using opposite Warner Music and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Banco Santander 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 Banco Santander will offset losses from the drop in Banco Santander'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 |
| Banco Santander vs. Ita Unibanco Holding | Banco Santander vs. Banco Santander SA | Banco Santander vs. Itasa Investimentos |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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