Correlation Between Live Nation and Summit Materials

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

Diversification Opportunities for Live Nation and Summit Materials

0.92

Correlation Coefficient

Live Nation  Summit Materials

Almost no diversification

The 3 months correlation between Live and Summit is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Live Nation i.e., Live Nation and Summit Materials go up and down completely randomly.

Pair Corralation between Live Nation and Summit Materials

Assuming the 90 days horizon Live Nation Entertainment is expected to under-perform the Summit Materials. In addition to that, Live Nation is 1.33 times more volatile than Summit Materials. It trades about -0.16 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.24 per unit of volatility. If you would invest  4,780  in Summit Materials on October 10, 2024 and sell it today you would earn a total of  160.00  from holding Summit Materials or generate 3.35% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Summit Materials

Live Nation Entertainment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 14 (%) 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.

Summit Materials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Nation and Summit Materials

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

The idea behind Live Nation Entertainment and Summit Materials 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.