Correlation Between Warner Music and Titan Machinery
Can any of the company-specific risk be diversified away by investing in both Warner Music and Titan Machinery 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 Titan Machinery 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 Titan Machinery, you can compare the effects of market volatilities on Warner Music and Titan Machinery 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 Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Titan Machinery.
Diversification Opportunities for Warner Music and Titan Machinery
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and Titan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Warner Music i.e., Warner Music and Titan Machinery go up and down completely randomly.
Pair Corralation between Warner Music and Titan Machinery
Assuming the 90 days horizon Warner Music Group is expected to generate 0.46 times more return on investment than Titan Machinery. However, Warner Music Group is 2.16 times less risky than Titan Machinery. It trades about 0.01 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.05 per unit of risk. If you would invest 2,951 in Warner Music Group on September 24, 2024 and sell it today you would lose (6.00) from holding Warner Music Group or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Titan Machinery
Performance |
| Timeline |
| Warner Music Group |
| Titan Machinery |
Warner Music and Titan Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Titan Machinery
The main advantage of trading using opposite Warner Music and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Titan Machinery 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 Titan Machinery will offset losses from the drop in Titan Machinery's long position.| Warner Music vs. The Walt Disney | Warner Music vs. The Walt Disney | Warner Music vs. Charter Communications | Warner Music vs. ViacomCBS |
| Titan Machinery vs. WW Grainger | Titan Machinery vs. Fastenal Company | Titan Machinery vs. Watsco Inc | Titan Machinery vs. WATSCO INC B |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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