Correlation Between Live Nation and Mercedes-Benz Group

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

Diversification Opportunities for Live Nation and Mercedes-Benz Group

-0.61

Correlation Coefficient

Live Nation  Mercedes-Benz Group

Excellent diversification

The 3 months correlation between Live and Mercedes-Benz is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz Group 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 Mercedes-Benz Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of Live Nation i.e., Live Nation and Mercedes-Benz Group go up and down completely randomly.

Pair Corralation between Live Nation and Mercedes-Benz Group

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 1.28 times more return on investment than Mercedes-Benz Group. However, Live Nation is 1.28 times more volatile than Mercedes Benz Group AG. It trades about 0.12 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about 0.0 per unit of risk. If you would invest  8,190  in Live Nation Entertainment on October 24, 2024 and sell it today you would earn a total of  4,900  from holding Live Nation Entertainment or generate 59.83% 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.  Mercedes Benz Group AG

Live Nation Entertainment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 14 (%) 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.

Mercedes Benz Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Live Nation Entertainment and Mercedes Benz Group AG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.