Correlation Between Warner Music and Fluent
Can any of the company-specific risk be diversified away by investing in both Warner Music and Fluent 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 Fluent 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 Fluent Inc, you can compare the effects of market volatilities on Warner Music and Fluent 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 Fluent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Fluent.
Diversification Opportunities for Warner Music and Fluent
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and Fluent is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Fluent Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fluent 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 Fluent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fluent Inc has no effect on the direction of Warner Music i.e., Warner Music and Fluent go up and down completely randomly.
Pair Corralation between Warner Music and Fluent
Considering the 90-day investment horizon Warner Music Group is expected to generate 0.41 times more return on investment than Fluent. However, Warner Music Group is 2.45 times less risky than Fluent. It trades about 0.02 of its potential returns per unit of risk. Fluent Inc is currently generating about -0.06 per unit of risk. If you would invest 3,186 in Warner Music Group on August 27, 2024 and sell it today you would earn a total of 19.00 from holding Warner Music Group or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Fluent Inc
Performance |
| Timeline |
| Warner Music Group |
| Fluent Inc |
Warner Music and Fluent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Fluent
The main advantage of trading using opposite Warner Music and Fluent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Fluent 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 Fluent will offset losses from the drop in Fluent's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Fluent vs. Mirriad Advertising plc | Fluent vs. INEO Tech Corp | Fluent vs. Innovid Corp | Fluent vs. Townsquare Media |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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