Correlation Between Warner Music and CN MODERN
Can any of the company-specific risk be diversified away by investing in both Warner Music and CN MODERN 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 CN MODERN 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 CN MODERN DAIRY, you can compare the effects of market volatilities on Warner Music and CN MODERN 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 CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and CN MODERN.
Diversification Opportunities for Warner Music and CN MODERN
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and 07M is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY 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 CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of Warner Music i.e., Warner Music and CN MODERN go up and down completely randomly.
Pair Corralation between Warner Music and CN MODERN
Assuming the 90 days horizon Warner Music Group is expected to generate 0.49 times more return on investment than CN MODERN. However, Warner Music Group is 2.04 times less risky than CN MODERN. It trades about 0.4 of its potential returns per unit of risk. CN MODERN DAIRY is currently generating about 0.19 per unit of risk. If you would invest 2,770 in Warner Music Group on November 27, 2024 and sell it today you would earn a total of 566.00 from holding Warner Music Group or generate 20.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. CN MODERN DAIRY
Performance |
| Timeline |
| Warner Music Group |
| CN MODERN DAIRY |
Warner Music and CN MODERN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and CN MODERN
The main advantage of trading using opposite Warner Music and CN MODERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, CN MODERN 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 CN MODERN will offset losses from the drop in CN MODERN's long position.| Warner Music vs. THAI BEVERAGE | Warner Music vs. United Breweries Co | Warner Music vs. Chengdu PUTIAN Telecommunications | Warner Music vs. China Resources Beer |
| CN MODERN vs. MARKET VECTR RETAIL | CN MODERN vs. AEON STORES | CN MODERN vs. Iridium Communications | CN MODERN vs. Burlington Stores |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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