Correlation Between Live Nation and HYDROFARM HLD

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

Diversification Opportunities for Live Nation and HYDROFARM HLD

0.27

Correlation Coefficient

Live Nation  HYDROFARM HLD

Modest diversification

The 3 months correlation between Live and HYDROFARM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP 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 HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of Live Nation i.e., Live Nation and HYDROFARM HLD go up and down completely randomly.

Pair Corralation between Live Nation and HYDROFARM HLD

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 0.46 times more return on investment than HYDROFARM HLD. However, Live Nation Entertainment is 2.16 times less risky than HYDROFARM HLD. It trades about 0.32 of its potential returns per unit of risk. HYDROFARM HLD GRP is currently generating about 0.04 per unit of risk. If you would invest  8,810  in Live Nation Entertainment on September 12, 2024 and sell it today you would earn a total of  4,115  from holding Live Nation Entertainment or generate 46.71% return on investment over 90 days.

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

Live Nation Entertainment  vs.  HYDROFARM HLD GRP

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. Despite nearly fragile basic indicators, Live Nation reported solid returns over the last few months and may actually be approaching a breakup point.

HYDROFARM HLD GRP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HYDROFARM HLD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Live Nation and HYDROFARM HLD

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

The idea behind Live Nation Entertainment and HYDROFARM HLD GRP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.