Correlation Between Warner Music and AMC Networks
Can any of the company-specific risk be diversified away by investing in both Warner Music and AMC Networks 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 AMC Networks 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 AMC Networks, you can compare the effects of market volatilities on Warner Music and AMC Networks 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 AMC Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and AMC Networks.
Diversification Opportunities for Warner Music and AMC Networks
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and AMC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and AMC Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Networks 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 AMC Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Networks has no effect on the direction of Warner Music i.e., Warner Music and AMC Networks go up and down completely randomly.
Pair Corralation between Warner Music and AMC Networks
Considering the 90-day investment horizon Warner Music is expected to generate 13.64 times less return on investment than AMC Networks. But when comparing it to its historical volatility, Warner Music Group is 2.03 times less risky than AMC Networks. It trades about 0.02 of its potential returns per unit of risk. AMC Networks is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 826.00 in AMC Networks on August 28, 2024 and sell it today you would earn a total of 104.00 from holding AMC Networks or generate 12.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. AMC Networks
Performance |
| Timeline |
| Warner Music Group |
| AMC Networks |
Warner Music and AMC Networks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and AMC Networks
The main advantage of trading using opposite Warner Music and AMC Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, AMC Networks 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 AMC Networks will offset losses from the drop in AMC Networks' long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| AMC Networks vs. Walt Disney | AMC Networks vs. Roku Inc | AMC Networks vs. Netflix | AMC Networks vs. AMC Entertainment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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