Correlation Between Warner Music and Bausch Lomb
Can any of the company-specific risk be diversified away by investing in both Warner Music and Bausch Lomb 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 Bausch Lomb 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 Bausch Lomb Corp, you can compare the effects of market volatilities on Warner Music and Bausch Lomb 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 Bausch Lomb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Bausch Lomb.
Diversification Opportunities for Warner Music and Bausch Lomb
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Warner and Bausch is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Bausch Lomb Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Lomb Corp 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 Bausch Lomb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Lomb Corp has no effect on the direction of Warner Music i.e., Warner Music and Bausch Lomb go up and down completely randomly.
Pair Corralation between Warner Music and Bausch Lomb
Considering the 90-day investment horizon Warner Music Group is expected to generate 1.2 times more return on investment than Bausch Lomb. However, Warner Music is 1.2 times more volatile than Bausch Lomb Corp. It trades about 0.05 of its potential returns per unit of risk. Bausch Lomb Corp is currently generating about -0.09 per unit of risk. If you would invest 3,204 in Warner Music Group on September 2, 2024 and sell it today you would earn a total of 48.00 from holding Warner Music Group or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Bausch Lomb Corp
Performance |
| Timeline |
| Warner Music Group |
| Bausch Lomb Corp |
Warner Music and Bausch Lomb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Bausch Lomb
The main advantage of trading using opposite Warner Music and Bausch Lomb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Bausch Lomb 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 Bausch Lomb will offset losses from the drop in Bausch Lomb'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 |
| Bausch Lomb vs. The Cooper Companies, | Bausch Lomb vs. ICU Medical | Bausch Lomb vs. Hologic | Bausch Lomb vs. Becton Dickinson and |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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