Correlation Between Warner Music and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both Warner Music and Harmony Gold 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 Harmony Gold 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 Harmony Gold Mining, you can compare the effects of market volatilities on Warner Music and Harmony Gold 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 Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Harmony Gold.
Diversification Opportunities for Warner Music and Harmony Gold
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and Harmony is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining 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 Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of Warner Music i.e., Warner Music and Harmony Gold go up and down completely randomly.
Pair Corralation between Warner Music and Harmony Gold
Considering the 90-day investment horizon Warner Music is expected to generate 1.86 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Warner Music Group is 1.85 times less risky than Harmony Gold. It trades about 0.04 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 880.00 in Harmony Gold Mining on September 1, 2024 and sell it today you would earn a total of 70.00 from holding Harmony Gold Mining or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Warner Music Group vs. Harmony Gold Mining
Performance |
| Timeline |
| Warner Music Group |
| Harmony Gold Mining |
Warner Music and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Harmony Gold
The main advantage of trading using opposite Warner Music and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Harmony Gold 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 Harmony Gold will offset losses from the drop in Harmony Gold'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 |
| Harmony Gold vs. Aurion Resources | Harmony Gold vs. Rio2 Limited | Harmony Gold vs. Palamina Corp | Harmony Gold vs. BTU Metals Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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