Correlation Between Warner Music and Xunlei
Can any of the company-specific risk be diversified away by investing in both Warner Music and Xunlei 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 Xunlei 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 Xunlei Ltd Adr, you can compare the effects of market volatilities on Warner Music and Xunlei 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 Xunlei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Xunlei.
Diversification Opportunities for Warner Music and Xunlei
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Warner and Xunlei is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Warner Music i.e., Warner Music and Xunlei go up and down completely randomly.
Pair Corralation between Warner Music and Xunlei
Considering the 90-day investment horizon Warner Music is expected to generate 2.46 times less return on investment than Xunlei. But when comparing it to its historical volatility, Warner Music Group is 1.78 times less risky than Xunlei. It trades about 0.01 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 193.00 in Xunlei Ltd Adr on August 28, 2024 and sell it today you would lose (4.00) from holding Xunlei Ltd Adr or give up 2.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Xunlei Ltd Adr
Performance |
| Timeline |
| Warner Music Group |
| Xunlei Ltd Adr |
Warner Music and Xunlei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Xunlei
The main advantage of trading using opposite Warner Music and Xunlei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Xunlei 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 Xunlei will offset losses from the drop in Xunlei's long position.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Xunlei vs. Travelzoo | Xunlei vs. Emerald Expositions Events | Xunlei vs. Ziff Davis | Xunlei vs. Direct Digital 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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