Correlation Between Warner Music and Seven West
Can any of the company-specific risk be diversified away by investing in both Warner Music and Seven West 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 Seven West 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 Seven West Media, you can compare the effects of market volatilities on Warner Music and Seven West 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 Seven West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Seven West.
Diversification Opportunities for Warner Music and Seven West
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Warner and Seven is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media 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 Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Warner Music i.e., Warner Music and Seven West go up and down completely randomly.
Pair Corralation between Warner Music and Seven West
Assuming the 90 days horizon Warner Music Group is expected to generate 0.37 times more return on investment than Seven West. However, Warner Music Group is 2.72 times less risky than Seven West. It trades about 0.04 of its potential returns per unit of risk. Seven West Media is currently generating about -0.02 per unit of risk. If you would invest 2,875 in Warner Music Group on September 15, 2024 and sell it today you would earn a total of 247.00 from holding Warner Music Group or generate 8.59% 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. Seven West Media
Performance |
| Timeline |
| Warner Music Group |
| Seven West Media |
Warner Music and Seven West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Seven West
The main advantage of trading using opposite Warner Music and Seven West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Seven West 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 Seven West will offset losses from the drop in Seven West's long position.| Warner Music vs. REINET INVESTMENTS SCA | Warner Music vs. HK Electric Investments | Warner Music vs. GUARDANT HEALTH CL | Warner Music vs. REGAL ASIAN INVESTMENTS |
| Seven West vs. Live Nation Entertainment | Seven West vs. Toho Co | Seven West vs. Superior Plus Corp | Seven West vs. NMI Holdings |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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