Correlation Between Live Nation and Target

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

Diversification Opportunities for Live Nation and Target

-0.58

Correlation Coefficient

Live Nation  Target

Excellent diversification

The 3 months correlation between Live and Target is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Live Nation i.e., Live Nation and Target go up and down completely randomly.

Pair Corralation between Live Nation and Target

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 0.32 times more return on investment than Target. However, Live Nation Entertainment is 3.16 times less risky than Target. It trades about 0.18 of its potential returns per unit of risk. Target is currently generating about -0.06 per unit of risk. If you would invest  12,130  in Live Nation Entertainment on September 16, 2024 and sell it today you would earn a total of  795.00  from holding Live Nation Entertainment or generate 6.55% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Target

Live Nation Entertainment

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Live Nation reported solid returns over the last few months and may actually be approaching a breakup point.

Target

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Live Nation Entertainment and Target 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..