Correlation Between Warner Music and Vivendi SA
Can any of the company-specific risk be diversified away by investing in both Warner Music and Vivendi SA 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 Vivendi SA 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 Vivendi SA, you can compare the effects of market volatilities on Warner Music and Vivendi SA 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 Vivendi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Vivendi SA.
Diversification Opportunities for Warner Music and Vivendi SA
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Warner and Vivendi is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Vivendi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vivendi SA 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 Vivendi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vivendi SA has no effect on the direction of Warner Music i.e., Warner Music and Vivendi SA go up and down completely randomly.
Pair Corralation between Warner Music and Vivendi SA
Considering the 90-day investment horizon Warner Music Group is expected to generate 0.88 times more return on investment than Vivendi SA. However, Warner Music Group is 1.14 times less risky than Vivendi SA. It trades about 0.05 of its potential returns per unit of risk. Vivendi SA is currently generating about 0.03 per unit of risk. If you would invest 2,478 in Warner Music Group on August 31, 2024 and sell it today you would earn a total of 732.00 from holding Warner Music Group or generate 29.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.71% |
| Values | Daily Returns |
Warner Music Group vs. Vivendi SA
Performance |
| Timeline |
| Warner Music Group |
| Vivendi SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Warner Music and Vivendi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Vivendi SA
The main advantage of trading using opposite Warner Music and Vivendi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Vivendi SA 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 Vivendi SA will offset losses from the drop in Vivendi SA's long position.| Warner Music vs. Roku Inc | Warner Music vs. AMC Entertainment Holdings | Warner Music vs. Paramount Global Class | Warner Music vs. Warner Bros Discovery |
| Vivendi SA vs. Universal Music Group | Vivendi SA vs. Reservoir Media | Vivendi SA vs. Atlanta Braves Holdings, | Vivendi SA vs. Warner Music Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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