Correlation Between Warner Music and Golden Energy
Can any of the company-specific risk be diversified away by investing in both Warner Music and Golden Energy 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 Golden Energy 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 Golden Energy Offshore, you can compare the effects of market volatilities on Warner Music and Golden Energy 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 Golden Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Golden Energy.
Diversification Opportunities for Warner Music and Golden Energy
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Warner and Golden is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Golden Energy Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Energy Offshore 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 Golden Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Energy Offshore has no effect on the direction of Warner Music i.e., Warner Music and Golden Energy go up and down completely randomly.
Pair Corralation between Warner Music and Golden Energy
Considering the 90-day investment horizon Warner Music Group is expected to generate 1.56 times more return on investment than Golden Energy. However, Warner Music is 1.56 times more volatile than Golden Energy Offshore. It trades about 0.29 of its potential returns per unit of risk. Golden Energy Offshore is currently generating about 0.0 per unit of risk. If you would invest 2,930 in Warner Music Group on November 9, 2024 and sell it today you would earn a total of 245.00 from holding Warner Music Group or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Warner Music Group vs. Golden Energy Offshore
Performance |
| Timeline |
| Warner Music Group |
| Golden Energy Offshore |
Warner Music and Golden Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Golden Energy
The main advantage of trading using opposite Warner Music and Golden Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Golden Energy 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 Golden Energy will offset losses from the drop in Golden Energy's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Golden Energy vs. Hapag Lloyd Aktiengesellschaft | Golden Energy vs. Hapag Lloyd Aktiengesellschaft | Golden Energy vs. AP Moeller Maersk AS | Golden Energy vs. AP Mller |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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