Correlation Between Warner Music and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both Warner Music and Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical, you can compare the effects of market volatilities on Warner Music and Westlake Chemical 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 Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Westlake Chemical.
Diversification Opportunities for Warner Music and Westlake Chemical
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and Westlake is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical 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 Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical has no effect on the direction of Warner Music i.e., Warner Music and Westlake Chemical go up and down completely randomly.
Pair Corralation between Warner Music and Westlake Chemical
Assuming the 90 days horizon Warner Music Group is expected to generate 1.03 times more return on investment than Westlake Chemical. However, Warner Music is 1.03 times more volatile than Westlake Chemical. It trades about 0.05 of its potential returns per unit of risk. Westlake Chemical is currently generating about -0.06 per unit of risk. If you would invest 2,740 in Warner Music Group on September 1, 2024 and sell it today you would earn a total of 283.00 from holding Warner Music Group or generate 10.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Warner Music Group vs. Westlake Chemical
Performance |
| Timeline |
| Warner Music Group |
| Westlake Chemical |
Warner Music and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Westlake Chemical
The main advantage of trading using opposite Warner Music and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Westlake Chemical 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 Westlake Chemical will offset losses from the drop in Westlake Chemical'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 |
| Westlake Chemical vs. PENN NATL GAMING | Westlake Chemical vs. GigaMedia | Westlake Chemical vs. HOCHSCHILD MINING | Westlake Chemical vs. TSOGO SUN GAMING |
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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