Correlation Between Live Nation and Aqua America

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

Diversification Opportunities for Live Nation and Aqua America

0.66

Correlation Coefficient

Live Nation  Aqua America

Poor diversification

The 3 months correlation between Live and Aqua is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America 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 Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of Live Nation i.e., Live Nation and Aqua America go up and down completely randomly.

Pair Corralation between Live Nation and Aqua America

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 1.39 times more return on investment than Aqua America. However, Live Nation is 1.39 times more volatile than Aqua America. It trades about 0.08 of its potential returns per unit of risk. Aqua America is currently generating about -0.02 per unit of risk. If you would invest  6,699  in Live Nation Entertainment on October 4, 2024 and sell it today you would earn a total of  5,856  from holding Live Nation Entertainment or generate 87.42% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Aqua America

Live Nation Entertainment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 15 (%) 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.

Aqua America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aqua America is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Live Nation and Aqua America

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

The idea behind Live Nation Entertainment and Aqua America 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.