Correlation Between Warner Bros and Gaia

Can any of the company-specific risk be diversified away by investing in both Warner Bros and Gaia 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 Bros and Gaia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Warner Bros Discovery and Gaia Inc, you can compare the effects of market volatilities on Warner Bros and Gaia 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 Bros with a short position of Gaia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Bros and Gaia.

Diversification Opportunities for Warner Bros and Gaia

-0.47

Correlation Coefficient

Warner Bros  Gaia

Very good diversification

The 3 months correlation between Warner and Gaia is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc and Warner Bros 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 Bros Discovery are associated (or correlated) with Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of Warner Bros i.e., Warner Bros and Gaia go up and down completely randomly.

Pair Corralation between Warner Bros and Gaia

Considering the 90-day investment horizon Warner Bros Discovery is expected to under-perform the Gaia. But the stock apears to be less risky and, when comparing its historical volatility, Warner Bros Discovery is 2.18 times less risky than Gaia. The stock trades about -0.16 of its potential returns per unit of risk. The Gaia Inc is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  320.00  in Gaia Inc on January 31, 2024 and sell it today you would earn a total of  88.00  from holding Gaia Inc or generate 27.5% return on investment over 90 days.

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

Warner Bros Discovery  vs.  Gaia Inc

Warner Bros Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Warner Bros Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gaia Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gaia Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Gaia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Bros and Gaia

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

The idea behind Warner Bros Discovery and Gaia Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.