Correlation Between Seven West and Warner Music
Can any of the company-specific risk be diversified away by investing in both Seven West and Warner Music 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 Seven West and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seven West Media and Warner Music Group, you can compare the effects of market volatilities on Seven West and Warner Music 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 Seven West with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven West and Warner Music.
Diversification Opportunities for Seven West and Warner Music
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Seven and Warner is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group and Seven West 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 Seven West Media are associated (or correlated) with Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Seven West i.e., Seven West and Warner Music go up and down completely randomly.
Pair Corralation between Seven West and Warner Music
Assuming the 90 days horizon Seven West Media is expected to under-perform the Warner Music. In addition to that, Seven West is 2.58 times more volatile than Warner Music Group. It trades about -0.02 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.03 per unit of volatility. If you would invest 2,800 in Warner Music Group on September 15, 2024 and sell it today you would earn a total of 322.00 from holding Warner Music Group or generate 11.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seven West Media vs. Warner Music Group
Performance |
| Timeline |
| Seven West Media |
| Warner Music Group |
Seven West and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seven West and Warner Music
The main advantage of trading using opposite Seven West and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Seven West vs. Live Nation Entertainment | Seven West vs. Toho Co | Seven West vs. Superior Plus Corp | Seven West vs. NMI Holdings |
| Warner Music vs. REINET INVESTMENTS SCA | Warner Music vs. HK Electric Investments | Warner Music vs. GUARDANT HEALTH CL | Warner Music vs. REGAL ASIAN INVESTMENTS |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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