Correlation Between Walt Disney and Warner Music
Can any of the company-specific risk be diversified away by investing in both Walt Disney 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 Walt Disney and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Walt Disney and Warner Music Group, you can compare the effects of market volatilities on Walt Disney 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 Walt Disney with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walt Disney and Warner Music.
Diversification Opportunities for Walt Disney and Warner Music
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walt and Warner is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney 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 Walt Disney 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 The Walt Disney 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 Walt Disney i.e., Walt Disney and Warner Music go up and down completely randomly.
Pair Corralation between Walt Disney and Warner Music
Assuming the 90 days horizon The Walt Disney is expected to generate 1.0 times more return on investment than Warner Music. However, Walt Disney is 1.0 times more volatile than Warner Music Group. It trades about 0.33 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.1 per unit of risk. If you would invest 8,642 in The Walt Disney on August 28, 2024 and sell it today you would earn a total of 2,392 from holding The Walt Disney or generate 27.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Walt Disney vs. Warner Music Group
Performance |
| Timeline |
| Walt Disney |
| Warner Music Group |
Walt Disney and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walt Disney and Warner Music
The main advantage of trading using opposite Walt Disney and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walt Disney 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.| Walt Disney vs. Superior Plus Corp | Walt Disney vs. NMI Holdings | Walt Disney vs. Origin Agritech | Walt Disney vs. SIVERS SEMICONDUCTORS AB |
| Warner Music vs. The Walt Disney | Warner Music vs. Superior Plus Corp | Warner Music vs. NMI Holdings | Warner Music vs. Origin Agritech |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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