Correlation Between Monument Circle and Warner Music

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

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

Diversification Opportunities for Monument Circle and Warner Music

0.02

Correlation Coefficient

Monument Circle  Warner Music

Significant diversification

The 3 months correlation between Monument and Warner is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Monument Circle Acquisition 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 Monument Circle 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 Monument Circle Acquisition 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 Monument Circle i.e., Monument Circle and Warner Music go up and down completely randomly.

Pair Corralation between Monument Circle and Warner Music

If you would invest  3,107  in Warner Music Group on September 26, 2024 and sell it today you would earn a total of  0.00  from holding Warner Music Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Monument Circle Acquisition  vs.  Warner Music Group

Monument Circle Acqu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monument Circle Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Monument Circle is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Warner Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Warner Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Monument Circle and Warner Music

The main advantage of trading using opposite Monument Circle and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monument Circle 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 Monument Circle Acquisition 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.