Correlation Between Warner Bros and Imax Corp

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

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

Diversification Opportunities for Warner Bros and Imax Corp

0.77

Correlation Coefficient

Warner Bros  Imax Corp

Poor diversification

The 3 months correlation between Warner and Imax is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Imax Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imax Corp and Warner Bros 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 Bros Discovery are associated (or correlated) with Imax Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imax Corp has no effect on the direction of Warner Bros i.e., Warner Bros and Imax Corp go up and down completely randomly.

Pair Corralation between Warner Bros and Imax Corp

Considering the 90-day investment horizon Warner Bros is expected to generate 4.37 times less return on investment than Imax Corp. In addition to that, Warner Bros is 1.47 times more volatile than Imax Corp. It trades about 0.01 of its total potential returns per unit of risk. Imax Corp is currently generating about 0.06 per unit of volatility. If you would invest  1,582  in Imax Corp on August 31, 2024 and sell it today you would earn a total of  1,050  from holding Imax Corp or generate 66.37% return on investment over 90 days.

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

Warner Bros Discovery  vs.  Imax Corp

Warner Bros Discovery

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Imax Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imax Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Imax Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Bros and Imax Corp

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

The idea behind Warner Bros Discovery and Imax Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.