Correlation Between Warner Music and ADTRAN
Can any of the company-specific risk be diversified away by investing in both Warner Music and ADTRAN 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 ADTRAN 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 ADTRAN Inc, you can compare the effects of market volatilities on Warner Music and ADTRAN 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 ADTRAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and ADTRAN.
Diversification Opportunities for Warner Music and ADTRAN
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and ADTRAN is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc 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 ADTRAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADTRAN Inc has no effect on the direction of Warner Music i.e., Warner Music and ADTRAN go up and down completely randomly.
Pair Corralation between Warner Music and ADTRAN
Considering the 90-day investment horizon Warner Music Group is expected to under-perform the ADTRAN. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 2.55 times less risky than ADTRAN. The stock trades about -0.02 of its potential returns per unit of risk. The ADTRAN Inc is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 629.00 in ADTRAN Inc on August 26, 2024 and sell it today you would earn a total of 233.00 from holding ADTRAN Inc or generate 37.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. ADTRAN Inc
Performance |
| Timeline |
| Warner Music Group |
| ADTRAN Inc |
Warner Music and ADTRAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and ADTRAN
The main advantage of trading using opposite Warner Music and ADTRAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, ADTRAN 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 ADTRAN will offset losses from the drop in ADTRAN's long position.| Warner Music vs. ADTRAN Inc | Warner Music vs. Belden Inc | Warner Music vs. ADC Therapeutics SA | Warner Music vs. Comtech Telecommunications Corp |
| ADTRAN vs. Mynaric AG ADR | ADTRAN vs. KVH Industries | ADTRAN vs. Telesat Corp | ADTRAN vs. Digi International |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |