Correlation Between Warner Music and Catalent
Can any of the company-specific risk be diversified away by investing in both Warner Music and Catalent 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 Catalent 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 Catalent, you can compare the effects of market volatilities on Warner Music and Catalent 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 Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Catalent.
Diversification Opportunities for Warner Music and Catalent
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Warner and Catalent is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Warner Music i.e., Warner Music and Catalent go up and down completely randomly.
Pair Corralation between Warner Music and Catalent
Considering the 90-day investment horizon Warner Music is expected to generate 1.6 times less return on investment than Catalent. In addition to that, Warner Music is 2.3 times more volatile than Catalent. It trades about 0.06 of its total potential returns per unit of risk. Catalent is currently generating about 0.24 per unit of volatility. If you would invest 5,860 in Catalent on September 1, 2024 and sell it today you would earn a total of 251.00 from holding Catalent or generate 4.28% 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. Catalent
Performance |
| Timeline |
| Warner Music Group |
| Catalent |
Warner Music and Catalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Catalent
The main advantage of trading using opposite Warner Music and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Catalent 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 Catalent will offset losses from the drop in Catalent'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 |
| Catalent vs. Crinetics Pharmaceuticals | Catalent vs. Enanta Pharmaceuticals | Catalent vs. Amicus Therapeutics | Catalent vs. Connect Biopharma 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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