Correlation Between Warner Music and CeoTronics
Can any of the company-specific risk be diversified away by investing in both Warner Music and CeoTronics 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 CeoTronics 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 CeoTronics AG, you can compare the effects of market volatilities on Warner Music and CeoTronics 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 CeoTronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and CeoTronics.
Diversification Opportunities for Warner Music and CeoTronics
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and CeoTronics is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of Warner Music i.e., Warner Music and CeoTronics go up and down completely randomly.
Pair Corralation between Warner Music and CeoTronics
Assuming the 90 days horizon Warner Music is expected to generate 4.14 times less return on investment than CeoTronics. But when comparing it to its historical volatility, Warner Music Group is 1.18 times less risky than CeoTronics. It trades about 0.01 of its potential returns per unit of risk. CeoTronics AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 458.00 in CeoTronics AG on September 3, 2024 and sell it today you would earn a total of 182.00 from holding CeoTronics AG or generate 39.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. CeoTronics AG
Performance |
| Timeline |
| Warner Music Group |
| CeoTronics AG |
Warner Music and CeoTronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and CeoTronics
The main advantage of trading using opposite Warner Music and CeoTronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, CeoTronics 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 CeoTronics will offset losses from the drop in CeoTronics' long position.The idea behind Warner Music Group and CeoTronics AG 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.| CeoTronics vs. 24SEVENOFFICE GROUP AB | CeoTronics vs. AUSTEVOLL SEAFOOD | CeoTronics vs. Lery Seafood Group | CeoTronics vs. Mobilezone Holding AG |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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