Correlation Between Live Nation and Applied Materials

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

By analyzing existing cross correlation between Live Nation Entertainment and Applied Materials, you can compare the effects of market volatilities on Live Nation and Applied Materials 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 Live Nation with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Nation and Applied Materials.

Diversification Opportunities for Live Nation and Applied Materials

-0.77

Correlation Coefficient

Live Nation  Applied Materials

Pay attention - limited upside

The 3 months correlation between Live and Applied is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Live Nation 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 Live Nation Entertainment are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Live Nation i.e., Live Nation and Applied Materials go up and down completely randomly.

Pair Corralation between Live Nation and Applied Materials

Assuming the 90 days trading horizon Live Nation Entertainment is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 2.28 times less risky than Applied Materials. The stock trades about -0.2 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17,220  in Applied Materials on October 9, 2024 and sell it today you would earn a total of  571.00  from holding Applied Materials or generate 3.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Live Nation Entertainment  vs.  Applied Materials

Live Nation Entertainment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Live Nation unveiled solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Live Nation and Applied Materials

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

The idea behind Live Nation Entertainment and Applied Materials 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.