Correlation Between Warner Music and UNITED RENTALS
Can any of the company-specific risk be diversified away by investing in both Warner Music and UNITED RENTALS 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 UNITED RENTALS 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 UNITED RENTALS, you can compare the effects of market volatilities on Warner Music and UNITED RENTALS 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 UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and UNITED RENTALS.
Diversification Opportunities for Warner Music and UNITED RENTALS
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and UNITED is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS 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 UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of Warner Music i.e., Warner Music and UNITED RENTALS go up and down completely randomly.
Pair Corralation between Warner Music and UNITED RENTALS
Assuming the 90 days horizon Warner Music Group is expected to generate 0.8 times more return on investment than UNITED RENTALS. However, Warner Music Group is 1.25 times less risky than UNITED RENTALS. It trades about 0.1 of its potential returns per unit of risk. UNITED RENTALS is currently generating about -0.02 per unit of risk. If you would invest 2,751 in Warner Music Group on September 30, 2024 and sell it today you would earn a total of 251.00 from holding Warner Music Group or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. UNITED RENTALS
Performance |
| Timeline |
| Warner Music Group |
| UNITED RENTALS |
Warner Music and UNITED RENTALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and UNITED RENTALS
The main advantage of trading using opposite Warner Music and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, UNITED RENTALS 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 UNITED RENTALS will offset losses from the drop in UNITED RENTALS's long position.| Warner Music vs. Chunghwa Telecom Co | Warner Music vs. KB HOME | Warner Music vs. Haier Smart Home | Warner Music vs. Autohome ADR |
| UNITED RENTALS vs. Sims Metal Management | UNITED RENTALS vs. Iridium Communications | UNITED RENTALS vs. Ares Management Corp | UNITED RENTALS vs. MAVEN WIRELESS SWEDEN |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |