Correlation Between Warner Music and FAST RETAIL
Can any of the company-specific risk be diversified away by investing in both Warner Music and FAST RETAIL 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 FAST RETAIL 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 FAST RETAIL ADR, you can compare the effects of market volatilities on Warner Music and FAST RETAIL 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 FAST RETAIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and FAST RETAIL.
Diversification Opportunities for Warner Music and FAST RETAIL
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and FAST is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR 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 FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of Warner Music i.e., Warner Music and FAST RETAIL go up and down completely randomly.
Pair Corralation between Warner Music and FAST RETAIL
Assuming the 90 days horizon Warner Music is expected to generate 1.62 times less return on investment than FAST RETAIL. In addition to that, Warner Music is 1.14 times more volatile than FAST RETAIL ADR. It trades about 0.08 of its total potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.15 per unit of volatility. If you would invest 2,980 in FAST RETAIL ADR on September 1, 2024 and sell it today you would earn a total of 180.00 from holding FAST RETAIL ADR or generate 6.04% 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. FAST RETAIL ADR
Performance |
| Timeline |
| Warner Music Group |
| FAST RETAIL ADR |
Warner Music and FAST RETAIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and FAST RETAIL
The main advantage of trading using opposite Warner Music and FAST RETAIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, FAST RETAIL 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 FAST RETAIL will offset losses from the drop in FAST RETAIL's long position.| Warner Music vs. Wayside Technology Group | Warner Music vs. PLAY2CHILL SA ZY | Warner Music vs. VARIOUS EATERIES LS | Warner Music vs. DXC Technology Co |
| FAST RETAIL vs. AOYAMA TRADING | FAST RETAIL vs. Global Fashion Group | FAST RETAIL vs. Superior Plus Corp | FAST RETAIL vs. NMI Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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