Correlation Between Live Nation and Disney

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

Diversification Opportunities for Live Nation and Disney

0.86

Correlation Coefficient

Live Nation  Disney

Very poor diversification

The 3 months correlation between Live and Disney is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Live Nation i.e., Live Nation and Disney go up and down completely randomly.

Pair Corralation between Live Nation and Disney

Considering the 90-day investment horizon Live Nation is expected to generate 1.29 times less return on investment than Disney. In addition to that, Live Nation is 1.11 times more volatile than Walt Disney. It trades about 0.12 of its total potential returns per unit of risk. Walt Disney is currently generating about 0.17 per unit of volatility. If you would invest  9,455  in Walt Disney on October 13, 2024 and sell it today you would earn a total of  1,410  from holding Walt Disney or generate 14.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Live Nation Entertainment  vs.  Walt Disney

Live Nation Entertainment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Live Nation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Walt Disney

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Nation and Disney

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

The idea behind Live Nation Entertainment and Walt Disney 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.