Correlation Between Capital One and Live Nation

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

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

Diversification Opportunities for Capital One and Live Nation

0.71

Correlation Coefficient

Capital One  Live Nation

Poor diversification

The 3 months correlation between Capital and Live is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial 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 Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and Live Nation go up and down completely randomly.

Pair Corralation between Capital One and Live Nation

Assuming the 90 days trading horizon Capital One Financial is expected to generate 1.28 times more return on investment than Live Nation. However, Capital One is 1.28 times more volatile than Live Nation Entertainment,. It trades about 0.2 of its potential returns per unit of risk. Live Nation Entertainment, is currently generating about 0.16 per unit of risk. If you would invest  47,114  in Capital One Financial on October 7, 2024 and sell it today you would earn a total of  9,658  from holding Capital One Financial or generate 20.5% return on investment over 90 days.

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

Capital One Financial  vs.  Live Nation Entertainment,

Capital One Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capital One sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak basic indicators, Live Nation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and Live Nation

The main advantage of trading using opposite Capital One and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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 Capital One Financial 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.