Correlation Between Magnite and Warner Music

Can any of the company-specific risk be diversified away by investing in both Magnite and Warner Music 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 Magnite and Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magnite and Warner Music Group, you can compare the effects of market volatilities on Magnite and Warner Music 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 Magnite with a short position of Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnite and Warner Music.

Diversification Opportunities for Magnite and Warner Music

0.51

Correlation Coefficient

Magnite  Warner Music

Very weak diversification

The 3 months correlation between Magnite and Warner is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group and Magnite 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 Magnite are associated (or correlated) with Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Magnite i.e., Magnite and Warner Music go up and down completely randomly.

Pair Corralation between Magnite and Warner Music

Given the investment horizon of 90 days Magnite is expected to generate 2.41 times more return on investment than Warner Music. However, Magnite is 2.41 times more volatile than Warner Music Group. It trades about 0.12 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.02 per unit of risk. If you would invest  1,304  in Magnite on September 23, 2024 and sell it today you would earn a total of  330.00  from holding Magnite or generate 25.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Magnite  vs.  Warner Music Group

Magnite

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Warner Music Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Warner Music is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Magnite and Warner Music

The main advantage of trading using opposite Magnite and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnite position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.

The idea behind Magnite and Warner Music Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.