Correlation Between Warner Music and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Warner Music and Coca Cola 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 Coca Cola 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 The Coca Cola, you can compare the effects of market volatilities on Warner Music and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Coca Cola.
Diversification Opportunities for Warner Music and Coca Cola
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Warner and Coca is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Warner Music i.e., Warner Music and Coca Cola go up and down completely randomly.
Pair Corralation between Warner Music and Coca Cola
Considering the 90-day investment horizon Warner Music Group is expected to generate 2.06 times more return on investment than Coca Cola. However, Warner Music is 2.06 times more volatile than The Coca Cola. It trades about 0.02 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.17 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. The Coca Cola
Performance |
| Timeline |
| Warner Music Group |
| Coca Cola |
Warner Music and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Coca Cola
The main advantage of trading using opposite Warner Music and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola Consolidated | Coca Cola vs. Keurig Dr Pepper |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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