Correlation Between Warner Music and BNP Paribas
Can any of the company-specific risk be diversified away by investing in both Warner Music and BNP Paribas 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 BNP Paribas 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 BNP Paribas SA, you can compare the effects of market volatilities on Warner Music and BNP Paribas 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 BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and BNP Paribas.
Diversification Opportunities for Warner Music and BNP Paribas
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and BNP is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and BNP Paribas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas SA 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 BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas SA has no effect on the direction of Warner Music i.e., Warner Music and BNP Paribas go up and down completely randomly.
Pair Corralation between Warner Music and BNP Paribas
Assuming the 90 days horizon Warner Music is expected to generate 3.27 times less return on investment than BNP Paribas. In addition to that, Warner Music is 1.28 times more volatile than BNP Paribas SA. It trades about 0.01 of its total potential returns per unit of risk. BNP Paribas SA is currently generating about 0.05 per unit of volatility. If you would invest 5,730 in BNP Paribas SA on November 9, 2024 and sell it today you would earn a total of 1,079 from holding BNP Paribas SA or generate 18.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. BNP Paribas SA
Performance |
| Timeline |
| Warner Music Group |
| BNP Paribas SA |
Warner Music and BNP Paribas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and BNP Paribas
The main advantage of trading using opposite Warner Music and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, BNP Paribas 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 BNP Paribas will offset losses from the drop in BNP Paribas' long position.| Warner Music vs. United Insurance Holdings | Warner Music vs. Sumitomo Rubber Industries | Warner Music vs. The Hanover Insurance | Warner Music vs. Insurance Australia Group |
| BNP Paribas vs. T MOBILE US | BNP Paribas vs. Cellnex Telecom SA | BNP Paribas vs. Sunny Optical Technology | BNP Paribas vs. Iridium Communications |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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