Correlation Between Warner Music and Imax Corp
Can any of the company-specific risk be diversified away by investing in both Warner Music and Imax Corp 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 Imax Corp 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 Imax Corp, you can compare the effects of market volatilities on Warner Music and Imax Corp 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 Imax Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Imax Corp.
Diversification Opportunities for Warner Music and Imax Corp
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and Imax is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Imax Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imax Corp 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 Imax Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imax Corp has no effect on the direction of Warner Music i.e., Warner Music and Imax Corp go up and down completely randomly.
Pair Corralation between Warner Music and Imax Corp
Considering the 90-day investment horizon Warner Music is expected to generate 21.94 times less return on investment than Imax Corp. But when comparing it to its historical volatility, Warner Music Group is 1.49 times less risky than Imax Corp. It trades about 0.02 of its potential returns per unit of risk. Imax Corp is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 2,055 in Imax Corp on August 28, 2024 and sell it today you would earn a total of 470.00 from holding Imax Corp or generate 22.87% 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. Imax Corp
Performance |
| Timeline |
| Warner Music Group |
| Imax Corp |
Warner Music and Imax Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Imax Corp
The main advantage of trading using opposite Warner Music and Imax Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Imax Corp 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 Imax Corp will offset losses from the drop in Imax Corp's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Imax Corp vs. Marcus | Imax Corp vs. Dave Busters Entertainment | Imax Corp vs. AMC Networks | Imax Corp vs. News Corp A |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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