Correlation Between Warner Music and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both Warner Music and UMC Electronics 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 UMC Electronics 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 UMC Electronics Co, you can compare the effects of market volatilities on Warner Music and UMC Electronics 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 UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and UMC Electronics.
Diversification Opportunities for Warner Music and UMC Electronics
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Warner and UMC is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics 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 UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of Warner Music i.e., Warner Music and UMC Electronics go up and down completely randomly.
Pair Corralation between Warner Music and UMC Electronics
Assuming the 90 days horizon Warner Music Group is expected to generate 0.73 times more return on investment than UMC Electronics. However, Warner Music Group is 1.37 times less risky than UMC Electronics. It trades about 0.04 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.05 per unit of risk. If you would invest 2,543 in Warner Music Group on September 12, 2024 and sell it today you would earn a total of 516.00 from holding Warner Music Group or generate 20.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. UMC Electronics Co
Performance |
| Timeline |
| Warner Music Group |
| UMC Electronics |
Warner Music and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and UMC Electronics
The main advantage of trading using opposite Warner Music and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, UMC Electronics 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 UMC Electronics will offset losses from the drop in UMC Electronics' 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 |
| UMC Electronics vs. Sunny Optical Technology | UMC Electronics vs. Hubbell Incorporated | UMC Electronics vs. TDK Corporation | UMC Electronics vs. Superior Plus Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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