Correlation Between Live Nation and Lions Gate

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

Diversification Opportunities for Live Nation and Lions Gate

0.26

Correlation Coefficient

Live Nation  Lions Gate

Modest diversification

The 3 months correlation between Live and Lions is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Lions Gate Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lions Gate Entertainment 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 Lions Gate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lions Gate Entertainment has no effect on the direction of Live Nation i.e., Live Nation and Lions Gate go up and down completely randomly.

Pair Corralation between Live Nation and Lions Gate

Assuming the 90 days horizon Live Nation Entertainment is expected to under-perform the Lions Gate. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 1.61 times less risky than Lions Gate. The stock trades about -0.05 of its potential returns per unit of risk. The Lions Gate Entertainment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  680.00  in Lions Gate Entertainment on December 28, 2024 and sell it today you would earn a total of  45.00  from holding Lions Gate Entertainment or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Live Nation Entertainment  vs.  Lions Gate Entertainment

Live Nation Entertainment

Risk-Adjusted Performance

Very Weak

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

Lions Gate Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lions Gate Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Lions Gate may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Live Nation and Lions Gate

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

The idea behind Live Nation Entertainment and Lions Gate Entertainment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.