Correlation Between Warner Bros and LiveOne

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

Diversification Opportunities for Warner Bros and LiveOne

0.77

Correlation Coefficient

Warner Bros  LiveOne

Poor diversification

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

Pair Corralation between Warner Bros and LiveOne

Considering the 90-day investment horizon Warner Bros is expected to generate 1.32 times less return on investment than LiveOne. But when comparing it to its historical volatility, Warner Bros Discovery is 2.12 times less risky than LiveOne. It trades about 0.13 of its potential returns per unit of risk. LiveOne is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  95.00  in LiveOne on September 29, 2024 and sell it today you would earn a total of  23.00  from holding LiveOne or generate 24.21% 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.  LiveOne

Warner Bros Discovery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 10 (%) 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.

LiveOne

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LiveOne are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, LiveOne displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Bros and LiveOne

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

The idea behind Warner Bros Discovery and LiveOne 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.