Correlation Between Warner Music and Criteo Sa

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

Diversification Opportunities for Warner Music and Criteo Sa

-0.55

Correlation Coefficient

Warner Music  Criteo Sa

Excellent diversification

The 3 months correlation between Warner and Criteo is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Criteo Sa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Criteo Sa 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 Criteo Sa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Criteo Sa has no effect on the direction of Warner Music i.e., Warner Music and Criteo Sa go up and down completely randomly.

Pair Corralation between Warner Music and Criteo Sa

Considering the 90-day investment horizon Warner Music Group is expected to generate 0.41 times more return on investment than Criteo Sa. However, Warner Music Group is 2.42 times less risky than Criteo Sa. It trades about 0.14 of its potential returns per unit of risk. Criteo Sa is currently generating about 0.0 per unit of risk. If you would invest  2,842  in Warner Music Group on September 12, 2024 and sell it today you would earn a total of  375.00  from holding Warner Music Group or generate 13.19% return on investment over 90 days.

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

Warner Music Group  vs.  Criteo Sa

Warner Music Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Warner Music reported solid returns over the last few months and may actually be approaching a breakup point.

Criteo Sa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Criteo Sa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Criteo Sa is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Warner Music and Criteo Sa

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

The idea behind Warner Music Group and Criteo Sa 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.