Correlation Between Live Nation and Edison International

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

Diversification Opportunities for Live Nation and Edison International

0.49

Correlation Coefficient

Live Nation  Edison International

Very weak diversification

The 3 months correlation between Live and Edison is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International 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 Edison International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison International has no effect on the direction of Live Nation i.e., Live Nation and Edison International go up and down completely randomly.

Pair Corralation between Live Nation and Edison International

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 1.45 times more return on investment than Edison International. However, Live Nation is 1.45 times more volatile than Edison International. It trades about 0.07 of its potential returns per unit of risk. Edison International is currently generating about 0.05 per unit of risk. If you would invest  6,849  in Live Nation Entertainment on October 7, 2024 and sell it today you would earn a total of  5,681  from holding Live Nation Entertainment or generate 82.95% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Edison International

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.

Edison International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Live Nation and Edison International

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

The idea behind Live Nation Entertainment and Edison International 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.