Correlation Between Warner Music and Western Union
Can any of the company-specific risk be diversified away by investing in both Warner Music and Western Union 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 Western Union 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 The Western Union, you can compare the effects of market volatilities on Warner Music and Western Union 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 Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Western Union.
Diversification Opportunities for Warner Music and Western Union
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Warner and Western is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Warner Music i.e., Warner Music and Western Union go up and down completely randomly.
Pair Corralation between Warner Music and Western Union
Assuming the 90 days trading horizon Warner Music is expected to generate 2.53 times less return on investment than Western Union. In addition to that, Warner Music is 2.04 times more volatile than The Western Union. It trades about 0.09 of its total potential returns per unit of risk. The Western Union is currently generating about 0.47 per unit of volatility. If you would invest 6,162 in The Western Union on September 12, 2024 and sell it today you would earn a total of 488.00 from holding The Western Union or generate 7.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. The Western Union
Performance |
| Timeline |
| Warner Music Group |
| Western Union |
Warner Music and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Western Union
The main advantage of trading using opposite Warner Music and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Western Union 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 Western Union will offset losses from the drop in Western Union's long position.| Warner Music vs. Livetech da Bahia | Warner Music vs. GX AI TECH | Warner Music vs. Charter Communications | Warner Music vs. Spotify Technology SA |
| Western Union vs. Zoom Video Communications | Western Union vs. Verizon Communications | Western Union vs. Spotify Technology SA | Western Union vs. Bio Techne |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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