Correlation Between Live Nation and Scandic Hotels

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

Diversification Opportunities for Live Nation and Scandic Hotels

-0.4

Correlation Coefficient

Live Nation  Scandic Hotels

Very good diversification

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

Pair Corralation between Live Nation and Scandic Hotels

Assuming the 90 days trading horizon Live Nation is expected to generate 1.1 times less return on investment than Scandic Hotels. In addition to that, Live Nation is 1.03 times more volatile than Scandic Hotels Group. It trades about 0.07 of its total potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.07 per unit of volatility. If you would invest  3,836  in Scandic Hotels Group on October 25, 2024 and sell it today you would earn a total of  3,249  from holding Scandic Hotels Group or generate 84.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Live Nation Entertainment  vs.  Scandic Hotels Group

Live Nation Entertainment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 13 (%) 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.

Scandic Hotels Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandic Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Scandic Hotels is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Live Nation and Scandic Hotels

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

The idea behind Live Nation Entertainment and Scandic Hotels Group 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 Anywhere module to track or share privately all of your investments from the convenience of any device.