Correlation Between Warner Music and Sphere Entertainment
Can any of the company-specific risk be diversified away by investing in both Warner Music and Sphere Entertainment 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 Sphere Entertainment 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 Sphere Entertainment Co, you can compare the effects of market volatilities on Warner Music and Sphere Entertainment 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 Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Sphere Entertainment.
Diversification Opportunities for Warner Music and Sphere Entertainment
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Warner and Sphere is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Warner Music i.e., Warner Music and Sphere Entertainment go up and down completely randomly.
Pair Corralation between Warner Music and Sphere Entertainment
Considering the 90-day investment horizon Warner Music Group is expected to generate 0.82 times more return on investment than Sphere Entertainment. However, Warner Music Group is 1.22 times less risky than Sphere Entertainment. It trades about 0.01 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.15 per unit of risk. If you would invest 3,203 in Warner Music Group on August 30, 2024 and sell it today you would earn a total of 7.00 from holding Warner Music Group or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Sphere Entertainment Co
Performance |
| Timeline |
| Warner Music Group |
| Sphere Entertainment |
Warner Music and Sphere Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Sphere Entertainment
The main advantage of trading using opposite Warner Music and Sphere Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Sphere Entertainment 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 Sphere Entertainment will offset losses from the drop in Sphere Entertainment's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Sphere Entertainment vs. Life Time Group | Sphere Entertainment vs. Daily Journal Corp | Sphere Entertainment vs. Pearson PLC ADR | Sphere Entertainment vs. Playtika Holding 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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