Correlation Between Live Nation and ConocoPhillips

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

Diversification Opportunities for Live Nation and ConocoPhillips

0.4

Correlation Coefficient

Live Nation  ConocoPhillips

Very weak diversification

The 3 months correlation between Live and ConocoPhillips is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment, and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Live Nation i.e., Live Nation and ConocoPhillips go up and down completely randomly.

Pair Corralation between Live Nation and ConocoPhillips

Assuming the 90 days trading horizon Live Nation Entertainment, is expected to generate 0.96 times more return on investment than ConocoPhillips. However, Live Nation Entertainment, is 1.04 times less risky than ConocoPhillips. It trades about 0.23 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.01 per unit of risk. If you would invest  12,324  in Live Nation Entertainment, on October 8, 2024 and sell it today you would earn a total of  3,462  from holding Live Nation Entertainment, or generate 28.09% 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.  ConocoPhillips

Live Nation Entertai

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment, are ranked lower than 18 (%) 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.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with Live Nation and ConocoPhillips

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

The idea behind Live Nation Entertainment, and ConocoPhillips 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.