Correlation Between Warner Bros and Cinemark Holdings

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

Diversification Opportunities for Warner Bros and Cinemark Holdings

-0.86

Correlation Coefficient

Warner Bros  Cinemark Holdings

Pay attention - limited upside

The 3 months correlation between Warner and Cinemark is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Cinemark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinemark Holdings 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 Cinemark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinemark Holdings has no effect on the direction of Warner Bros i.e., Warner Bros and Cinemark Holdings go up and down completely randomly.

Pair Corralation between Warner Bros and Cinemark Holdings

Considering the 90-day investment horizon Warner Bros Discovery is expected to under-perform the Cinemark Holdings. In addition to that, Warner Bros is 1.17 times more volatile than Cinemark Holdings. It trades about -0.05 of its total potential returns per unit of risk. Cinemark Holdings is currently generating about 0.01 per unit of volatility. If you would invest  1,758  in Cinemark Holdings on January 31, 2024 and sell it today you would lose (4.00) from holding Cinemark Holdings or give up 0.23% of portfolio value over 90 days.

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

Warner Bros Discovery  vs.  Cinemark Holdings

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.

Cinemark Holdings

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cinemark Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Cinemark Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warner Bros and Cinemark Holdings

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

The idea behind Warner Bros Discovery and Cinemark Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.