Correlation Between Warner Music and Bolloré SE

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

Diversification Opportunities for Warner Music and Bolloré SE

-0.35

Correlation Coefficient

Warner Music  Bolloré SE

Very good diversification

The 3 months correlation between Warner and Bolloré is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Bollor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bolloré SE 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 Bolloré SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bolloré SE has no effect on the direction of Warner Music i.e., Warner Music and Bolloré SE go up and down completely randomly.

Pair Corralation between Warner Music and Bolloré SE

Considering the 90-day investment horizon Warner Music Group is expected to generate 0.75 times more return on investment than Bolloré SE. However, Warner Music Group is 1.34 times less risky than Bolloré SE. It trades about 0.17 of its potential returns per unit of risk. Bollor SE is currently generating about -0.03 per unit of risk. If you would invest  2,779  in Warner Music Group on August 31, 2024 and sell it today you would earn a total of  431.00  from holding Warner Music Group or generate 15.51% return on investment over 90 days.

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

Warner Music Group  vs.  Bollor SE

Warner Music Group

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Warner Music reported solid returns over the last few months and may actually be approaching a breakup point.

Bolloré SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bollor SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bolloré SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Warner Music and Bolloré SE

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

The idea behind Warner Music Group and Bollor SE 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..