Correlation Between Applied Materials, and Live Nation

Can any of the company-specific risk be diversified away by investing in both Applied Materials, and Live Nation 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 Applied Materials, and Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Materials, and Live Nation Entertainment,, you can compare the effects of market volatilities on Applied Materials, and Live Nation 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 Applied Materials, with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials, and Live Nation.

Diversification Opportunities for Applied Materials, and Live Nation

-0.62

Correlation Coefficient

Applied Materials,  Live Nation

Excellent diversification

The 3 months correlation between Applied and Live is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Live Nation Entertainment, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertai and Applied Materials, 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 Applied Materials, are associated (or correlated) with Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertai has no effect on the direction of Applied Materials, i.e., Applied Materials, and Live Nation go up and down completely randomly.

Pair Corralation between Applied Materials, and Live Nation

Assuming the 90 days trading horizon Applied Materials, is expected to generate 1.31 times more return on investment than Live Nation. However, Applied Materials, is 1.31 times more volatile than Live Nation Entertainment,. It trades about 0.05 of its potential returns per unit of risk. Live Nation Entertainment, is currently generating about -0.03 per unit of risk. If you would invest  10,254  in Applied Materials, on October 6, 2024 and sell it today you would earn a total of  144.00  from holding Applied Materials, or generate 1.4% return on investment over 90 days.

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

Applied Materials,  vs.  Live Nation Entertainment,

Applied Materials,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Applied Materials, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Live Nation Entertai

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment, are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Live Nation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials, and Live Nation

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

The idea behind Applied Materials, and Live Nation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.