Correlation Between Live Nation and Nexstar Media

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

Diversification Opportunities for Live Nation and Nexstar Media

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Live and Nexstar is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Nexstar Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Media 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 Nexstar Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Media Group has no effect on the direction of Live Nation i.e., Live Nation and Nexstar Media go up and down completely randomly.

Pair Corralation between Live Nation and Nexstar Media

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 0.91 times more return on investment than Nexstar Media. However, Live Nation Entertainment is 1.1 times less risky than Nexstar Media. It trades about 0.07 of its potential returns per unit of risk. Nexstar Media Group is currently generating about -0.01 per unit of risk. If you would invest  7,332  in Live Nation Entertainment on October 24, 2024 and sell it today you would earn a total of  5,908  from holding Live Nation Entertainment or generate 80.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Live Nation Entertainment  vs.  Nexstar Media Group

 Performance 
       Timeline  
Live Nation Entertainment 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
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.
Nexstar Media Group 

Risk-Adjusted Performance

0 of 100

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

Live Nation and Nexstar Media Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Live Nation and Nexstar Media

The main advantage of trading using opposite Live Nation and Nexstar Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation position performs unexpectedly, Nexstar Media 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 Nexstar Media will offset losses from the drop in Nexstar Media's long position.
The idea behind Live Nation Entertainment and Nexstar Media Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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