Correlation Between Live Nation and Reading International

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

Diversification Opportunities for Live Nation and Reading International

-0.84

Correlation Coefficient

Live Nation  Reading International

Pay attention - limited upside

The 3 months correlation between Live and Reading is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Reading International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reading International 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 Reading International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reading International has no effect on the direction of Live Nation i.e., Live Nation and Reading International go up and down completely randomly.

Pair Corralation between Live Nation and Reading International

Considering the 90-day investment horizon Live Nation Entertainment is expected to generate 0.35 times more return on investment than Reading International. However, Live Nation Entertainment is 2.89 times less risky than Reading International. It trades about 0.4 of its potential returns per unit of risk. Reading International is currently generating about -0.03 per unit of risk. If you would invest  9,534  in Live Nation Entertainment on September 2, 2024 and sell it today you would earn a total of  4,291  from holding Live Nation Entertainment or generate 45.01% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Reading International

Live Nation Entertainment

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 31 (%) 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.

Reading International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reading International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Live Nation and Reading International

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

The idea behind Live Nation Entertainment and Reading International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.