Correlation Between Warner Music and Cass Information
Can any of the company-specific risk be diversified away by investing in both Warner Music and Cass Information 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 Cass Information 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 Cass Information Systems, you can compare the effects of market volatilities on Warner Music and Cass Information 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 Cass Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Cass Information.
Diversification Opportunities for Warner Music and Cass Information
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and Cass is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems 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 Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Warner Music i.e., Warner Music and Cass Information go up and down completely randomly.
Pair Corralation between Warner Music and Cass Information
Assuming the 90 days horizon Warner Music is expected to generate 1.6 times less return on investment than Cass Information. In addition to that, Warner Music is 1.1 times more volatile than Cass Information Systems. It trades about 0.13 of its total potential returns per unit of risk. Cass Information Systems is currently generating about 0.23 per unit of volatility. If you would invest 3,872 in Cass Information Systems on September 5, 2024 and sell it today you would earn a total of 377.00 from holding Cass Information Systems or generate 9.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Cass Information Systems
Performance |
| Timeline |
| Warner Music Group |
| Cass Information Systems |
Warner Music and Cass Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Cass Information
The main advantage of trading using opposite Warner Music and Cass Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Cass Information 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 Cass Information will offset losses from the drop in Cass Information's long position.| Warner Music vs. AUST AGRICULTURAL | Warner Music vs. North American Construction | Warner Music vs. Granite Construction | Warner Music vs. Automatic Data Processing |
| Cass Information vs. Superior Plus Corp | Cass Information vs. NMI Holdings | Cass Information vs. Origin Agritech | Cass Information vs. SIVERS SEMICONDUCTORS AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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