Correlation Between Warner Bros and Manchester United

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

Diversification Opportunities for Warner Bros and Manchester United

0.6

Correlation Coefficient

Warner Bros  Manchester United

Poor diversification

The 3 months correlation between Warner and Manchester is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Manchester United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manchester United 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 Manchester United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manchester United has no effect on the direction of Warner Bros i.e., Warner Bros and Manchester United go up and down completely randomly.

Pair Corralation between Warner Bros and Manchester United

Considering the 90-day investment horizon Warner Bros Discovery is expected to generate 1.95 times more return on investment than Manchester United. However, Warner Bros is 1.95 times more volatile than Manchester United. It trades about 0.19 of its potential returns per unit of risk. Manchester United is currently generating about 0.0 per unit of risk. If you would invest  736.00  in Warner Bros Discovery on September 2, 2024 and sell it today you would earn a total of  312.00  from holding Warner Bros Discovery or generate 42.39% 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.  Manchester United

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 fragile fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Manchester United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manchester United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Manchester United is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Warner Bros and Manchester United

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

The idea behind Warner Bros Discovery and Manchester United 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.