Correlation Between Warner Music and Waste Management
Can any of the company-specific risk be diversified away by investing in both Warner Music and Waste Management 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 Waste Management 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 Waste Management, you can compare the effects of market volatilities on Warner Music and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Waste Management.
Diversification Opportunities for Warner Music and Waste Management
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Warner and Waste is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Warner Music i.e., Warner Music and Waste Management go up and down completely randomly.
Pair Corralation between Warner Music and Waste Management
Assuming the 90 days trading horizon Warner Music Group is expected to generate 1.0 times more return on investment than Waste Management. However, Warner Music is 1.0 times more volatile than Waste Management. It trades about 0.26 of its potential returns per unit of risk. Waste Management is currently generating about 0.21 per unit of risk. If you would invest 3,834 in Warner Music Group on September 6, 2024 and sell it today you would earn a total of 990.00 from holding Warner Music Group or generate 25.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.41% |
Values | Daily Returns |
Warner Music Group vs. Waste Management
Performance |
Timeline |
Warner Music Group |
Waste Management |
Warner Music and Waste Management Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Warner Music and Waste Management
The main advantage of trading using opposite Warner Music and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.Warner Music vs. Spotify Technology SA | Warner Music vs. Monster Beverage | Warner Music vs. United States Steel | Warner Music vs. Credit Acceptance |
Waste Management vs. Livetech da Bahia | Waste Management vs. Marvell Technology | Waste Management vs. Beyond Meat | Waste Management vs. Apartment Investment and |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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