Correlation Between Warner Music and LiveOne
Can any of the company-specific risk be diversified away by investing in both Warner Music and LiveOne 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 LiveOne 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 LiveOne, you can compare the effects of market volatilities on Warner Music and LiveOne 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 LiveOne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and LiveOne.
Diversification Opportunities for Warner Music and LiveOne
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Warner and LiveOne is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and LiveOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveOne 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 LiveOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveOne has no effect on the direction of Warner Music i.e., Warner Music and LiveOne go up and down completely randomly.
Pair Corralation between Warner Music and LiveOne
Considering the 90-day investment horizon Warner Music is expected to generate 12.95 times less return on investment than LiveOne. But when comparing it to its historical volatility, Warner Music Group is 3.02 times less risky than LiveOne. It trades about 0.01 of its potential returns per unit of risk. LiveOne is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 61.00 in LiveOne on August 27, 2024 and sell it today you would earn a total of 27.00 from holding LiveOne or generate 44.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. LiveOne
Performance |
| Timeline |
| Warner Music Group |
| LiveOne |
Warner Music and LiveOne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and LiveOne
The main advantage of trading using opposite Warner Music and LiveOne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, LiveOne 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 LiveOne will offset losses from the drop in LiveOne's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| LiveOne vs. ADTRAN Inc | LiveOne vs. Belden Inc | LiveOne vs. ADC Therapeutics SA | LiveOne vs. Comtech Telecommunications 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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