Correlation Between Live Nation and CAIRN HOMES

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

Diversification Opportunities for Live Nation and CAIRN HOMES

0.02

Correlation Coefficient

Live Nation  CAIRN HOMES

Significant diversification

The 3 months correlation between Live and CAIRN is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of Live Nation i.e., Live Nation and CAIRN HOMES go up and down completely randomly.

Pair Corralation between Live Nation and CAIRN HOMES

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 0.93 times more return on investment than CAIRN HOMES. However, Live Nation Entertainment is 1.08 times less risky than CAIRN HOMES. It trades about -0.13 of its potential returns per unit of risk. CAIRN HOMES EO is currently generating about -0.22 per unit of risk. If you would invest  14,075  in Live Nation Entertainment on December 6, 2024 and sell it today you would lose (645.00) from holding Live Nation Entertainment or give up 4.58% of portfolio value over 90 days.

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

Live Nation Entertainment  vs.  CAIRN HOMES EO

Live Nation Entertainment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Live Nation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CAIRN HOMES EO

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Live Nation and CAIRN HOMES

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

The idea behind Live Nation Entertainment and CAIRN HOMES EO 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.