Correlation Between Honda and Live Nation

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

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

Diversification Opportunities for Honda and Live Nation

-0.39

Correlation Coefficient

Honda  Live Nation

Very good diversification

The 3 months correlation between Honda and Live is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co 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 Honda 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 Honda Motor Co 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 Honda i.e., Honda and Live Nation go up and down completely randomly.

Pair Corralation between Honda and Live Nation

Assuming the 90 days trading horizon Honda Motor Co is expected to generate 0.89 times more return on investment than Live Nation. However, Honda Motor Co is 1.12 times less risky than Live Nation. It trades about -0.01 of its potential returns per unit of risk. Live Nation Entertainment, is currently generating about -0.08 per unit of risk. If you would invest  17,568  in Honda Motor Co on December 24, 2024 and sell it today you would lose (408.00) from holding Honda Motor Co or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Honda Motor Co  vs.  Live Nation Entertainment,

Honda Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honda Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Honda 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

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Honda and Live Nation

The main advantage of trading using opposite Honda and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda 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 Honda Motor Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..