Correlation Between Warner Music and NTG Nordic
Can any of the company-specific risk be diversified away by investing in both Warner Music and NTG Nordic 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 NTG Nordic 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 NTG Nordic Transport, you can compare the effects of market volatilities on Warner Music and NTG Nordic 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 NTG Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and NTG Nordic.
Diversification Opportunities for Warner Music and NTG Nordic
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Warner and NTG is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and NTG Nordic Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTG Nordic Transport 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 NTG Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTG Nordic Transport has no effect on the direction of Warner Music i.e., Warner Music and NTG Nordic go up and down completely randomly.
Pair Corralation between Warner Music and NTG Nordic
Assuming the 90 days horizon Warner Music is expected to generate 2.34 times less return on investment than NTG Nordic. But when comparing it to its historical volatility, Warner Music Group is 1.37 times less risky than NTG Nordic. It trades about 0.01 of its potential returns per unit of risk. NTG Nordic Transport is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,410 in NTG Nordic Transport on October 12, 2024 and sell it today you would lose (105.00) from holding NTG Nordic Transport or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. NTG Nordic Transport
Performance |
| Timeline |
| Warner Music Group |
| NTG Nordic Transport |
Warner Music and NTG Nordic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and NTG Nordic
The main advantage of trading using opposite Warner Music and NTG Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, NTG Nordic 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 NTG Nordic will offset losses from the drop in NTG Nordic's long position.| Warner Music vs. Digilife Technologies Limited | Warner Music vs. PKSHA TECHNOLOGY INC | Warner Music vs. Addtech AB | Warner Music vs. The Hanover Insurance |
| NTG Nordic vs. KIMBALL ELECTRONICS | NTG Nordic vs. Methode Electronics | NTG Nordic vs. Mitsui Chemicals | NTG Nordic vs. BW OFFSHORE LTD |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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