Correlation Between Warner Music and Perseus Mining
Can any of the company-specific risk be diversified away by investing in both Warner Music and Perseus Mining 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 Perseus Mining 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 Perseus Mining Limited, you can compare the effects of market volatilities on Warner Music and Perseus Mining 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 Perseus Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Perseus Mining.
Diversification Opportunities for Warner Music and Perseus Mining
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Warner and Perseus is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining 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 Perseus Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perseus Mining has no effect on the direction of Warner Music i.e., Warner Music and Perseus Mining go up and down completely randomly.
Pair Corralation between Warner Music and Perseus Mining
Assuming the 90 days horizon Warner Music is expected to generate 9.8 times less return on investment than Perseus Mining. But when comparing it to its historical volatility, Warner Music Group is 1.15 times less risky than Perseus Mining. It trades about 0.02 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 155.00 in Perseus Mining Limited on September 12, 2024 and sell it today you would earn a total of 15.00 from holding Perseus Mining Limited or generate 9.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Perseus Mining Limited
Performance |
| Timeline |
| Warner Music Group |
| Perseus Mining |
Warner Music and Perseus Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Perseus Mining
The main advantage of trading using opposite Warner Music and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Perseus Mining 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 Perseus Mining will offset losses from the drop in Perseus Mining's long position.| Warner Music vs. The Walt Disney | Warner Music vs. Charter Communications | Warner Music vs. Superior Plus Corp | Warner Music vs. SIVERS SEMICONDUCTORS AB |
| Perseus Mining vs. Vastned Retail NV | Perseus Mining vs. MARKET VECTR RETAIL | Perseus Mining vs. Carsales | Perseus Mining vs. QURATE RETAIL INC |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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