Correlation Between Live Nation and Toho

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

Diversification Opportunities for Live Nation and Toho

0.58

Correlation Coefficient

Live Nation  Toho

Very weak diversification

The 3 months correlation between Live and Toho is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Toho Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toho 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 Toho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toho has no effect on the direction of Live Nation i.e., Live Nation and Toho go up and down completely randomly.

Pair Corralation between Live Nation and Toho

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 1.1 times more return on investment than Toho. However, Live Nation is 1.1 times more volatile than Toho Co. It trades about 0.1 of its potential returns per unit of risk. Toho Co is currently generating about 0.08 per unit of risk. If you would invest  8,500  in Live Nation Entertainment on September 14, 2024 and sell it today you would earn a total of  4,170  from holding Live Nation Entertainment or generate 49.06% 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.  Toho Co

Live Nation Entertainment

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Live Nation reported solid returns over the last few months and may actually be approaching a breakup point.

Toho

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toho Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Toho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Live Nation and Toho

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

The idea behind Live Nation Entertainment and Toho Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.