Correlation Between Warner Music and Cars
Can any of the company-specific risk be diversified away by investing in both Warner Music and Cars 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 Cars 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 Cars Inc, you can compare the effects of market volatilities on Warner Music and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Cars.
Diversification Opportunities for Warner Music and Cars
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Warner and Cars is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Warner Music i.e., Warner Music and Cars go up and down completely randomly.
Pair Corralation between Warner Music and Cars
Considering the 90-day investment horizon Warner Music is expected to generate 16.17 times less return on investment than Cars. But when comparing it to its historical volatility, Warner Music Group is 1.26 times less risky than Cars. It trades about 0.03 of its potential returns per unit of risk. Cars Inc is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 1,600 in Cars Inc on August 31, 2024 and sell it today you would earn a total of 370.00 from holding Cars Inc or generate 23.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Cars Inc
Performance |
| Timeline |
| Warner Music Group |
| Cars Inc |
Warner Music and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Cars
The main advantage of trading using opposite Warner Music and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Warner Music vs. Roku Inc | Warner Music vs. AMC Entertainment Holdings | Warner Music vs. Paramount Global Class | Warner Music vs. Warner Bros Discovery |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Stocks Directory Find actively traded stocks across global markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |