Correlation Between Warner Music and New Residential
Can any of the company-specific risk be diversified away by investing in both Warner Music and New Residential 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 New Residential 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 New Residential Investment, you can compare the effects of market volatilities on Warner Music and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and New Residential.
Diversification Opportunities for Warner Music and New Residential
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and New is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Warner Music i.e., Warner Music and New Residential go up and down completely randomly.
Pair Corralation between Warner Music and New Residential
Assuming the 90 days horizon Warner Music Group is expected to under-perform the New Residential. In addition to that, Warner Music is 1.75 times more volatile than New Residential Investment. It trades about -0.1 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.15 per unit of volatility. If you would invest 980.00 in New Residential Investment on October 17, 2024 and sell it today you would earn a total of 62.00 from holding New Residential Investment or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. New Residential Investment
Performance |
| Timeline |
| Warner Music Group |
| New Residential Inve |
Warner Music and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and New Residential
The main advantage of trading using opposite Warner Music and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Warner Music vs. COFCO Joycome Foods | Warner Music vs. FIREWEED METALS P | Warner Music vs. GREENX METALS LTD | Warner Music vs. MTY Food Group |
| New Residential vs. Monster Beverage Corp | New Residential vs. Motorcar Parts of | New Residential vs. SAN MIGUEL BREWERY | New Residential vs. Warner Music Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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