Correlation Between Live Nation and BNP Paribas

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

Diversification Opportunities for Live Nation and BNP Paribas

-0.71

Correlation Coefficient

Live Nation  BNP Paribas

Pay attention - limited upside

The 3 months correlation between Live and BNP is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and BNP Paribas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas SA 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 BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas SA has no effect on the direction of Live Nation i.e., Live Nation and BNP Paribas go up and down completely randomly.

Pair Corralation between Live Nation and BNP Paribas

Assuming the 90 days horizon Live Nation is expected to generate 2.24 times less return on investment than BNP Paribas. But when comparing it to its historical volatility, Live Nation Entertainment is 1.51 times less risky than BNP Paribas. It trades about 0.24 of its potential returns per unit of risk. BNP Paribas SA is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  5,726  in BNP Paribas SA on October 24, 2024 and sell it today you would earn a total of  494.00  from holding BNP Paribas SA or generate 8.63% return on investment over 90 days.

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

Live Nation Entertainment  vs.  BNP Paribas SA

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.

BNP Paribas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BNP Paribas 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 BNP Paribas

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

The idea behind Live Nation Entertainment and BNP Paribas SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.