Correlation Between Warner Music and RCM TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both Warner Music and RCM TECHNOLOGIES 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 RCM TECHNOLOGIES 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 RCM TECHNOLOGIES, you can compare the effects of market volatilities on Warner Music and RCM TECHNOLOGIES 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 RCM TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and RCM TECHNOLOGIES.
Diversification Opportunities for Warner Music and RCM TECHNOLOGIES
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Warner and RCM is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and RCM TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM TECHNOLOGIES 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 RCM TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM TECHNOLOGIES has no effect on the direction of Warner Music i.e., Warner Music and RCM TECHNOLOGIES go up and down completely randomly.
Pair Corralation between Warner Music and RCM TECHNOLOGIES
Assuming the 90 days horizon Warner Music Group is expected to generate 0.59 times more return on investment than RCM TECHNOLOGIES. However, Warner Music Group is 1.71 times less risky than RCM TECHNOLOGIES. It trades about 0.01 of its potential returns per unit of risk. RCM TECHNOLOGIES is currently generating about -0.02 per unit of risk. If you would invest 3,009 in Warner Music Group on September 3, 2024 and sell it today you would earn a total of 23.00 from holding Warner Music Group or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. RCM TECHNOLOGIES
Performance |
| Timeline |
| Warner Music Group |
| RCM TECHNOLOGIES |
Warner Music and RCM TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and RCM TECHNOLOGIES
The main advantage of trading using opposite Warner Music and RCM TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, RCM TECHNOLOGIES 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 RCM TECHNOLOGIES will offset losses from the drop in RCM TECHNOLOGIES's long position.The idea behind Warner Music Group and RCM TECHNOLOGIES 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.| RCM TECHNOLOGIES vs. Compugroup Medical SE | RCM TECHNOLOGIES vs. CVR Medical Corp | RCM TECHNOLOGIES vs. MEDICAL FACILITIES NEW | RCM TECHNOLOGIES vs. KENEDIX OFFICE INV |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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