Correlation Between Roku and Warner Bros

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

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

Diversification Opportunities for Roku and Warner Bros

0.71

Correlation Coefficient

Roku  Warner Bros

Poor diversification

The 3 months correlation between Roku and Warner is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc and Warner Bros Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Bros Discovery and Roku 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 Roku Inc are associated (or correlated) with Warner Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Bros Discovery has no effect on the direction of Roku i.e., Roku and Warner Bros go up and down completely randomly.

Pair Corralation between Roku and Warner Bros

Given the investment horizon of 90 days Roku Inc is expected to under-perform the Warner Bros. In addition to that, Roku is 1.05 times more volatile than Warner Bros Discovery. It trades about -0.1 of its total potential returns per unit of risk. Warner Bros Discovery is currently generating about -0.09 per unit of volatility. If you would invest  873.00  in Warner Bros Discovery on February 27, 2024 and sell it today you would lose (100.00) from holding Warner Bros Discovery or give up 11.45% of portfolio value over 90 days.

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

Roku Inc  vs.  Warner Bros Discovery

Roku Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roku Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 latest abnormal performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Roku and Warner Bros

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

The idea behind Roku Inc and Warner Bros Discovery 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.