Correlation Between Live Nation and PT Steel

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

Diversification Opportunities for Live Nation and PT Steel

-0.79

Correlation Coefficient

Live Nation  PT Steel

Pay attention - limited upside

The 3 months correlation between Live and S08 is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and PT Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Steel Pipe 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 PT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Steel Pipe has no effect on the direction of Live Nation i.e., Live Nation and PT Steel go up and down completely randomly.

Pair Corralation between Live Nation and PT Steel

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 0.12 times more return on investment than PT Steel. However, Live Nation Entertainment is 8.27 times less risky than PT Steel. It trades about -0.11 of its potential returns per unit of risk. PT Steel Pipe is currently generating about -0.02 per unit of risk. If you would invest  12,625  in Live Nation Entertainment on October 11, 2024 and sell it today you would lose (255.00) from holding Live Nation Entertainment or give up 2.02% of portfolio value over 90 days.

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

Live Nation Entertainment  vs.  PT Steel Pipe

Live Nation Entertainment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 13 (%) 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.

PT Steel Pipe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Steel Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Live Nation and PT Steel

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

The idea behind Live Nation Entertainment and PT Steel Pipe 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.