Correlation Between Dolby Laboratories and Live Nation

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

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

Diversification Opportunities for Dolby Laboratories and Live Nation

0.76

Correlation Coefficient

Dolby Laboratories  Live Nation

Poor diversification

The 3 months correlation between Dolby and Live is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dolby Laboratories and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment and Dolby Laboratories 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 Dolby Laboratories 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 Entertainment has no effect on the direction of Dolby Laboratories i.e., Dolby Laboratories and Live Nation go up and down completely randomly.

Pair Corralation between Dolby Laboratories and Live Nation

Assuming the 90 days horizon Dolby Laboratories is expected to generate 0.85 times more return on investment than Live Nation. However, Dolby Laboratories is 1.18 times less risky than Live Nation. It trades about 0.02 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.05 per unit of risk. If you would invest  7,471  in Dolby Laboratories on December 28, 2024 and sell it today you would earn a total of  79.00  from holding Dolby Laboratories or generate 1.06% return on investment over 90 days.

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

Dolby Laboratories  vs.  Live Nation Entertainment

Dolby Laboratories

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dolby Laboratories are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dolby Laboratories is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Live Nation Entertainment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dolby Laboratories and Live Nation

The main advantage of trading using opposite Dolby Laboratories and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolby Laboratories 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 Dolby Laboratories 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.