Correlation Between Live Nation and Alfa Financial

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

Diversification Opportunities for Live Nation and Alfa Financial

0.35

Correlation Coefficient

Live Nation  Alfa Financial

Weak diversification

The 3 months correlation between Live and Alfa is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of Live Nation i.e., Live Nation and Alfa Financial go up and down completely randomly.

Pair Corralation between Live Nation and Alfa Financial

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 1.02 times more return on investment than Alfa Financial. However, Live Nation is 1.02 times more volatile than Alfa Financial Software. It trades about 0.19 of its potential returns per unit of risk. Alfa Financial Software is currently generating about -0.05 per unit of risk. If you would invest  10,565  in Live Nation Entertainment on October 24, 2024 and sell it today you would earn a total of  2,525  from holding Live Nation Entertainment or generate 23.9% 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.  Alfa Financial Software

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.

Alfa Financial Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Financial Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Live Nation and Alfa Financial

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

The idea behind Live Nation Entertainment and Alfa Financial Software 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.