Correlation Between Live Nation and Advanced Medical

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

Diversification Opportunities for Live Nation and Advanced Medical

0.42

Correlation Coefficient

Live Nation  Advanced Medical

Very weak diversification

The 3 months correlation between Live and Advanced is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol 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 Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of Live Nation i.e., Live Nation and Advanced Medical go up and down completely randomly.

Pair Corralation between Live Nation and Advanced Medical

Assuming the 90 days trading horizon Live Nation Entertainment is expected to under-perform the Advanced Medical. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 1.4 times less risky than Advanced Medical. The stock trades about -0.06 of its potential returns per unit of risk. The Advanced Medical Solutions is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  19,660  in Advanced Medical Solutions on December 22, 2024 and sell it today you would earn a total of  20.00  from holding Advanced Medical Solutions or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Live Nation Entertainment  vs.  Advanced Medical Solutions

Live Nation Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Live Nation Entertainment 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.

Advanced Medical Sol

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Advanced Medical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Live Nation and Advanced Medical

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

The idea behind Live Nation Entertainment and Advanced Medical Solutions 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.