Correlation Between Live Nation and Roku

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

Diversification Opportunities for Live Nation and Roku

0.11

Correlation Coefficient

Live Nation  Roku

Average diversification

The 3 months correlation between Live and Roku is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc 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 Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Live Nation i.e., Live Nation and Roku go up and down completely randomly.

Pair Corralation between Live Nation and Roku

Considering the 90-day investment horizon Live Nation is expected to generate 1.35 times less return on investment than Roku. But when comparing it to its historical volatility, Live Nation Entertainment is 2.19 times less risky than Roku. It trades about 0.08 of its potential returns per unit of risk. Roku Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,519  in Roku Inc on September 29, 2024 and sell it today you would earn a total of  3,184  from holding Roku Inc or generate 70.46% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Roku Inc

Live Nation Entertainment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 15 (%) 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.

Roku Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Roku may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Live Nation and Roku

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

The idea behind Live Nation Entertainment and Roku Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.