Correlation Between Live Nation and PayPal Holdings

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

Diversification Opportunities for Live Nation and PayPal Holdings

0.42

Correlation Coefficient

Live Nation  PayPal Holdings

Very weak diversification

The 3 months correlation between Live and PayPal is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment, and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings 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 PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of Live Nation i.e., Live Nation and PayPal Holdings go up and down completely randomly.

Pair Corralation between Live Nation and PayPal Holdings

Assuming the 90 days trading horizon Live Nation Entertainment, is expected to generate 0.74 times more return on investment than PayPal Holdings. However, Live Nation Entertainment, is 1.35 times less risky than PayPal Holdings. It trades about -0.13 of its potential returns per unit of risk. PayPal Holdings is currently generating about -0.22 per unit of risk. If you would invest  16,429  in Live Nation Entertainment, on December 24, 2024 and sell it today you would lose (2,492) from holding Live Nation Entertainment, or give up 15.17% of portfolio value over 90 days.

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

Live Nation Entertainment,  vs.  PayPal Holdings

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PayPal Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Live Nation and PayPal Holdings

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

The idea behind Live Nation Entertainment, and PayPal Holdings 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 Stocks Directory module to find actively traded stocks across global markets.