Correlation Between Warner Music and Fastenal

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

Diversification Opportunities for Warner Music and Fastenal

0.06

Correlation Coefficient

Warner Music  Fastenal

Significant diversification

The 3 months correlation between Warner and Fastenal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Warner Music i.e., Warner Music and Fastenal go up and down completely randomly.

Pair Corralation between Warner Music and Fastenal

Assuming the 90 days horizon Warner Music Group is expected to generate 0.51 times more return on investment than Fastenal. However, Warner Music Group is 1.96 times less risky than Fastenal. It trades about -0.05 of its potential returns per unit of risk. Fastenal Company is currently generating about -0.19 per unit of risk. If you would invest  2,844  in Warner Music Group on July 28, 2025 and sell it today you would lose (38.00) from holding Warner Music Group or give up 1.34% of portfolio value over 90 days.

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

Warner Music Group  vs.  Fastenal Company

Warner Music Group

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Fastenal

Risk-Adjusted Performance

Weakest

Over the last 90 days Fastenal Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Warner Music and Fastenal

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

The idea behind Warner Music Group and Fastenal Company 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.