Correlation Between National Beverage and Live Nation

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

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

Diversification Opportunities for National Beverage and Live Nation

0.83

Correlation Coefficient

National Beverage  Live Nation

Very poor diversification

The 3 months correlation between National and Live is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment and National Beverage 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 National Beverage Corp are associated (or correlated) with Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of National Beverage i.e., National Beverage and Live Nation go up and down completely randomly.

Pair Corralation between National Beverage and Live Nation

Assuming the 90 days trading horizon National Beverage Corp is expected to under-perform the Live Nation. In addition to that, National Beverage is 1.29 times more volatile than Live Nation Entertainment. It trades about 0.0 of its total potential returns per unit of risk. Live Nation Entertainment is currently generating about 0.26 per unit of volatility. If you would invest  12,222  in Live Nation Entertainment on September 12, 2024 and sell it today you would earn a total of  1,242  from holding Live Nation Entertainment or generate 10.16% return on investment over 90 days.

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

National Beverage Corp  vs.  Live Nation Entertainment

National Beverage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Live Nation Entertainment

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Live Nation unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Live Nation

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

The idea behind National Beverage Corp and Live Nation Entertainment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.