Correlation Between Warner Music and Tamboran Resources

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

Diversification Opportunities for Warner Music and Tamboran Resources

-0.4

Correlation Coefficient

Warner Music  Tamboran Resources

Very good diversification

The 3 months correlation between Warner and Tamboran is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Tamboran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamboran Resources 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 Tamboran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamboran Resources has no effect on the direction of Warner Music i.e., Warner Music and Tamboran Resources go up and down completely randomly.

Pair Corralation between Warner Music and Tamboran Resources

Considering the 90-day investment horizon Warner Music Group is expected to under-perform the Tamboran Resources. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 2.44 times less risky than Tamboran Resources. The stock trades about -0.12 of its potential returns per unit of risk. The Tamboran Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,725  in Tamboran Resources on September 25, 2024 and sell it today you would earn a total of  92.00  from holding Tamboran Resources or generate 5.33% 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.  Tamboran Resources

Warner Music Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Warner Music is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tamboran Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tamboran Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Warner Music and Tamboran Resources

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

The idea behind Warner Music Group and Tamboran Resources 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.