Correlation Between Weyco and Warner Music
Can any of the company-specific risk be diversified away by investing in both Weyco 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 Weyco and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weyco Group and Warner Music Group, you can compare the effects of market volatilities on Weyco 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 Weyco with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and Warner Music.
Diversification Opportunities for Weyco and Warner Music
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Weyco and Warner is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group 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 Weyco 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 Weyco Group 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 Weyco i.e., Weyco and Warner Music go up and down completely randomly.
Pair Corralation between Weyco and Warner Music
Given the investment horizon of 90 days Weyco Group is expected to generate 1.18 times more return on investment than Warner Music. However, Weyco is 1.18 times more volatile than Warner Music Group. It trades about 0.05 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.01 per unit of risk. If you would invest 2,382 in Weyco Group on September 3, 2024 and sell it today you would earn a total of 1,217 from holding Weyco Group or generate 51.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weyco Group vs. Warner Music Group
Performance |
| Timeline |
| Weyco Group |
| Warner Music Group |
Weyco and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weyco and Warner Music
The main advantage of trading using opposite Weyco and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco 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.The idea behind Weyco Group and Warner Music Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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