Correlation Between Warner Music and AIR CHINA
Can any of the company-specific risk be diversified away by investing in both Warner Music and AIR CHINA 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 AIR CHINA 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 AIR CHINA LTD, you can compare the effects of market volatilities on Warner Music and AIR CHINA 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 AIR CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and AIR CHINA.
Diversification Opportunities for Warner Music and AIR CHINA
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Warner and AIR is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and AIR CHINA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR CHINA LTD 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 AIR CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR CHINA LTD has no effect on the direction of Warner Music i.e., Warner Music and AIR CHINA go up and down completely randomly.
Pair Corralation between Warner Music and AIR CHINA
Assuming the 90 days horizon Warner Music Group is expected to generate 0.74 times more return on investment than AIR CHINA. However, Warner Music Group is 1.35 times less risky than AIR CHINA. It trades about 0.1 of its potential returns per unit of risk. AIR CHINA LTD is currently generating about -0.04 per unit of risk. If you would invest 2,995 in Warner Music Group on November 5, 2024 and sell it today you would earn a total of 135.00 from holding Warner Music Group or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Warner Music Group vs. AIR CHINA LTD
Performance |
| Timeline |
| Warner Music Group |
| AIR CHINA LTD |
Warner Music and AIR CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and AIR CHINA
The main advantage of trading using opposite Warner Music and AIR CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, AIR CHINA 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 AIR CHINA will offset losses from the drop in AIR CHINA's long position.| Warner Music vs. InPlay Oil Corp | Warner Music vs. Columbia Sportswear | Warner Music vs. EITZEN CHEMICALS | Warner Music vs. PLAY2CHILL SA ZY |
| AIR CHINA vs. HOCHSCHILD MINING | AIR CHINA vs. ETFS Coffee ETC | AIR CHINA vs. VARIOUS EATERIES LS | AIR CHINA vs. CLOVER HEALTH INV |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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