Correlation Between Warner Music and Performance Food
Can any of the company-specific risk be diversified away by investing in both Warner Music and Performance Food 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 Performance Food 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 Performance Food Group, you can compare the effects of market volatilities on Warner Music and Performance Food 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 Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Performance Food.
Diversification Opportunities for Warner Music and Performance Food
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and Performance is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Warner Music i.e., Warner Music and Performance Food go up and down completely randomly.
Pair Corralation between Warner Music and Performance Food
Assuming the 90 days horizon Warner Music Group is expected to generate 1.34 times more return on investment than Performance Food. However, Warner Music is 1.34 times more volatile than Performance Food Group. It trades about 0.4 of its potential returns per unit of risk. Performance Food Group is currently generating about -0.21 per unit of risk. If you would invest 2,770 in Warner Music Group on November 27, 2024 and sell it today you would earn a total of 566.00 from holding Warner Music Group or generate 20.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Performance Food Group
Performance |
| Timeline |
| Warner Music Group |
| Performance Food |
Warner Music and Performance Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Performance Food
The main advantage of trading using opposite Warner Music and Performance Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Performance Food 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 Performance Food will offset losses from the drop in Performance Food's long position.| Warner Music vs. THAI BEVERAGE | Warner Music vs. United Breweries Co | Warner Music vs. Chengdu PUTIAN Telecommunications | Warner Music vs. China Resources Beer |
| Performance Food vs. SPARTAN STORES | Performance Food vs. Iridium Communications | Performance Food vs. Chengdu PUTIAN Telecommunications | Performance Food vs. Costco Wholesale |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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