Correlation Between Warner Music and Paramount Global
Can any of the company-specific risk be diversified away by investing in both Warner Music and Paramount Global 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 Paramount Global 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 Paramount Global Class, you can compare the effects of market volatilities on Warner Music and Paramount Global 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 Paramount Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Paramount Global.
Diversification Opportunities for Warner Music and Paramount Global
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and Paramount is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Paramount Global Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global Class 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global Class has no effect on the direction of Warner Music i.e., Warner Music and Paramount Global go up and down completely randomly.
Pair Corralation between Warner Music and Paramount Global
Considering the 90-day investment horizon Warner Music Group is expected to generate 1.11 times more return on investment than Paramount Global. However, Warner Music is 1.11 times more volatile than Paramount Global Class. It trades about 0.08 of its potential returns per unit of risk. Paramount Global Class is currently generating about 0.07 per unit of risk. If you would invest 3,102 in Warner Music Group on November 4, 2024 and sell it today you would earn a total of 78.00 from holding Warner Music Group or generate 2.51% 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. Paramount Global Class
Performance |
| Timeline |
| Warner Music Group |
| Paramount Global Class |
Warner Music and Paramount Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Paramount Global
The main advantage of trading using opposite Warner Music and Paramount Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Paramount Global 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 Paramount Global will offset losses from the drop in Paramount Global's long position.| Warner Music vs. Liberty Media | Warner Music vs. Atlanta Braves Holdings, | Warner Music vs. News Corp B | Warner Music vs. News Corp A |
| Paramount Global vs. Walt Disney | Paramount Global vs. Roku Inc | Paramount Global vs. Netflix | Paramount Global vs. AMC Entertainment 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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