Correlation Between New Residential and Live Nation

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

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

Diversification Opportunities for New Residential and Live Nation

0.42

Correlation Coefficient

New Residential  Live Nation

Very weak diversification

The 3 months correlation between New and Live is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment 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 New Residential 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 New Residential Investment 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 New Residential i.e., New Residential and Live Nation go up and down completely randomly.

Pair Corralation between New Residential and Live Nation

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.57 times more return on investment than Live Nation. However, New Residential Investment is 1.77 times less risky than Live Nation. It trades about 0.05 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.02 per unit of risk. If you would invest  1,091  in New Residential Investment on December 29, 2024 and sell it today you would earn a total of  41.00  from holding New Residential Investment or generate 3.76% return on investment over 90 days.

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

New Residential Investment  vs.  Live Nation Entertainment

New Residential Inve

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 comparatively stable basic indicators, Live Nation is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with New Residential and Live Nation

The main advantage of trading using opposite New Residential and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential 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 New Residential Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.