Correlation Between Warner Music and Hanover House
Can any of the company-specific risk be diversified away by investing in both Warner Music and Hanover House 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 Hanover House 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 Hanover House, you can compare the effects of market volatilities on Warner Music and Hanover House 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 Hanover House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Hanover House.
Diversification Opportunities for Warner Music and Hanover House
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and Hanover is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Hanover House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover House 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 Hanover House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover House has no effect on the direction of Warner Music i.e., Warner Music and Hanover House go up and down completely randomly.
Pair Corralation between Warner Music and Hanover House
Considering the 90-day investment horizon Warner Music is expected to generate 12.69 times less return on investment than Hanover House. But when comparing it to its historical volatility, Warner Music Group is 6.96 times less risky than Hanover House. It trades about 0.04 of its potential returns per unit of risk. Hanover House is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 0.70 in Hanover House on September 1, 2024 and sell it today you would earn a total of 0.10 from holding Hanover House or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Hanover House
Performance |
| Timeline |
| Warner Music Group |
| Hanover House |
Warner Music and Hanover House Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Hanover House
The main advantage of trading using opposite Warner Music and Hanover House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Hanover House 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 Hanover House will offset losses from the drop in Hanover House'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 |
| Hanover House vs. Sanwire | Hanover House vs. SNM Gobal Holdings | Hanover House vs. All For One | Hanover House vs. Ggtoor Inc |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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