Correlation Between Live Nation and Revolution Beauty

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

Diversification Opportunities for Live Nation and Revolution Beauty

-0.55

Correlation Coefficient

Live Nation  Revolution Beauty

Excellent diversification

The 3 months correlation between Live and Revolution is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Revolution Beauty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Beauty 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 Revolution Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Beauty has no effect on the direction of Live Nation i.e., Live Nation and Revolution Beauty go up and down completely randomly.

Pair Corralation between Live Nation and Revolution Beauty

Assuming the 90 days trading horizon Live Nation Entertainment is expected to under-perform the Revolution Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 3.45 times less risky than Revolution Beauty. The stock trades about -0.05 of its potential returns per unit of risk. The Revolution Beauty Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Revolution Beauty Group on December 23, 2024 and sell it today you would lose (20.00) from holding Revolution Beauty Group or give up 1.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Live Nation Entertainment  vs.  Revolution Beauty Group

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.

Revolution Beauty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Revolution Beauty Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Revolution Beauty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Nation and Revolution Beauty

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

The idea behind Live Nation Entertainment and Revolution Beauty 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.