Correlation Between Warner Music and Solstad Offshore

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

Diversification Opportunities for Warner Music and Solstad Offshore

0.0

Correlation Coefficient

Warner Music  Solstad Offshore

Pay attention - limited upside

The 3 months correlation between Warner and Solstad is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Warner Music i.e., Warner Music and Solstad Offshore go up and down completely randomly.

Pair Corralation between Warner Music and Solstad Offshore

If you would invest  3,287  in Warner Music Group on September 14, 2024 and sell it today you would lose (13.00) from holding Warner Music Group or give up 0.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Warner Music Group  vs.  Solstad Offshore ASA

Warner Music Group

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting primary indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solstad Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Warner Music and Solstad Offshore

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

The idea behind Warner Music Group and Solstad Offshore ASA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.