Correlation Between Live Nation and Netflix

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

Diversification Opportunities for Live Nation and Netflix

0.95

Correlation Coefficient

Live Nation  Netflix

Almost no diversification

The 3 months correlation between Live and Netflix is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Live Nation i.e., Live Nation and Netflix go up and down completely randomly.

Pair Corralation between Live Nation and Netflix

Considering the 90-day investment horizon Live Nation Entertainment is expected to under-perform the Netflix. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 1.08 times less risky than Netflix. The stock trades about -0.23 of its potential returns per unit of risk. The Netflix is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  86,559  in Netflix on September 24, 2024 and sell it today you would earn a total of  4,586  from holding Netflix or generate 5.3% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Netflix

Live Nation Entertainment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Live Nation showed solid returns over the last few months and may actually be approaching a breakup point.

Netflix

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Nation and Netflix

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

The idea behind Live Nation Entertainment and Netflix 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.