Correlation Between Warner Music and Madison Square
Can any of the company-specific risk be diversified away by investing in both Warner Music and Madison Square 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 Madison Square 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 Madison Square Garden, you can compare the effects of market volatilities on Warner Music and Madison Square 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 Madison Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Madison Square.
Diversification Opportunities for Warner Music and Madison Square
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Warner and Madison is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden 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 Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of Warner Music i.e., Warner Music and Madison Square go up and down completely randomly.
Pair Corralation between Warner Music and Madison Square
Considering the 90-day investment horizon Warner Music Group is expected to under-perform the Madison Square. In addition to that, Warner Music is 1.43 times more volatile than Madison Square Garden. It trades about -0.03 of its total potential returns per unit of risk. Madison Square Garden is currently generating about 0.15 per unit of volatility. If you would invest 21,888 in Madison Square Garden on August 23, 2024 and sell it today you would earn a total of 961.00 from holding Madison Square Garden or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Madison Square Garden
Performance |
| Timeline |
| Warner Music Group |
| Madison Square Garden |
Warner Music and Madison Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Madison Square
The main advantage of trading using opposite Warner Music and Madison Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Madison Square 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 Madison Square will offset losses from the drop in Madison Square's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Madison Square vs. Atlanta Braves Holdings, | Madison Square vs. Liberty Media | Madison Square vs. Liberty Media | Madison Square vs. Atlanta Braves Holdings, |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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