Correlation Between Warner Music and ALBIS LEASING

Can any of the company-specific risk be diversified away by investing in both Warner Music and ALBIS LEASING 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 ALBIS LEASING 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 ALBIS LEASING AG, you can compare the effects of market volatilities on Warner Music and ALBIS LEASING 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 ALBIS LEASING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and ALBIS LEASING.

Diversification Opportunities for Warner Music and ALBIS LEASING

0.69

Correlation Coefficient

Warner Music  ALBIS LEASING

Poor diversification

The 3 months correlation between Warner and ALBIS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and ALBIS LEASING AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALBIS LEASING AG 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 ALBIS LEASING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALBIS LEASING AG has no effect on the direction of Warner Music i.e., Warner Music and ALBIS LEASING go up and down completely randomly.

Pair Corralation between Warner Music and ALBIS LEASING

Assuming the 90 days horizon Warner Music Group is expected to generate 4.2 times more return on investment than ALBIS LEASING. However, Warner Music is 4.2 times more volatile than ALBIS LEASING AG. It trades about 0.08 of its potential returns per unit of risk. ALBIS LEASING AG is currently generating about 0.09 per unit of risk. If you would invest  2,738  in Warner Music Group on September 24, 2024 and sell it today you would earn a total of  207.00  from holding Warner Music Group or generate 7.56% return on investment over 90 days.

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

Warner Music Group  vs.  ALBIS LEASING AG

Warner Music Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALBIS LEASING AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALBIS LEASING AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, ALBIS LEASING is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Warner Music and ALBIS LEASING

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

The idea behind Warner Music Group and ALBIS LEASING AG 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.