Correlation Between Warner Music and Bridgestone
Can any of the company-specific risk be diversified away by investing in both Warner Music and Bridgestone 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 Bridgestone 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 Bridgestone, you can compare the effects of market volatilities on Warner Music and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Bridgestone.
Diversification Opportunities for Warner Music and Bridgestone
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Warner and Bridgestone is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of Warner Music i.e., Warner Music and Bridgestone go up and down completely randomly.
Pair Corralation between Warner Music and Bridgestone
Assuming the 90 days horizon Warner Music is expected to generate 3.08 times less return on investment than Bridgestone. In addition to that, Warner Music is 1.62 times more volatile than Bridgestone. It trades about 0.03 of its total potential returns per unit of risk. Bridgestone is currently generating about 0.15 per unit of volatility. If you would invest 1,590 in Bridgestone on November 3, 2024 and sell it today you would earn a total of 80.00 from holding Bridgestone or generate 5.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Bridgestone
Performance |
| Timeline |
| Warner Music Group |
| Bridgestone |
Warner Music and Bridgestone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Bridgestone
The main advantage of trading using opposite Warner Music and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.| Warner Music vs. Autohome ADR | Warner Music vs. INVITATION HOMES DL | Warner Music vs. MEDICAL FACILITIES NEW | Warner Music vs. ADDUS HOMECARE |
| Bridgestone vs. AEGEAN AIRLINES | Bridgestone vs. Gladstone Investment | Bridgestone vs. CHRYSALIS INVESTMENTS LTD | Bridgestone vs. Virtus Investment Partners |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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