Correlation Between Warner Music and Allianz SE
Can any of the company-specific risk be diversified away by investing in both Warner Music and Allianz SE 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 Allianz SE 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 Allianz SE VNA, you can compare the effects of market volatilities on Warner Music and Allianz SE 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 Allianz SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Allianz SE.
Diversification Opportunities for Warner Music and Allianz SE
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Warner and Allianz is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Allianz SE VNA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz SE VNA 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 Allianz SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz SE VNA has no effect on the direction of Warner Music i.e., Warner Music and Allianz SE go up and down completely randomly.
Pair Corralation between Warner Music and Allianz SE
Assuming the 90 days horizon Warner Music is expected to generate 4.23 times less return on investment than Allianz SE. In addition to that, Warner Music is 2.0 times more volatile than Allianz SE VNA. It trades about 0.01 of its total potential returns per unit of risk. Allianz SE VNA is currently generating about 0.1 per unit of volatility. If you would invest 18,502 in Allianz SE VNA on September 3, 2024 and sell it today you would earn a total of 10,718 from holding Allianz SE VNA or generate 57.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Allianz SE VNA
Performance |
| Timeline |
| Warner Music Group |
| Allianz SE VNA |
Warner Music and Allianz SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Allianz SE
The main advantage of trading using opposite Warner Music and Allianz SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Allianz SE 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 Allianz SE will offset losses from the drop in Allianz SE's long position.The idea behind Warner Music Group and Allianz SE VNA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Allianz SE vs. UNIVMUSIC GRPADR050 | Allianz SE vs. CeoTronics AG | Allianz SE vs. CVS Health | Allianz SE 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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