Correlation Between Live Nation and Warner Bros

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

Diversification Opportunities for Live Nation and Warner Bros

0.86

Correlation Coefficient

Live Nation  Warner Bros

Very poor diversification

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

Pair Corralation between Live Nation and Warner Bros

Considering the 90-day investment horizon Live Nation is expected to generate 1.72 times less return on investment than Warner Bros. But when comparing it to its historical volatility, Live Nation Entertainment is 2.19 times less risky than Warner Bros. It trades about 0.19 of its potential returns per unit of risk. Warner Bros Discovery is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  760.00  in Warner Bros Discovery on October 25, 2024 and sell it today you would earn a total of  245.00  from holding Warner Bros Discovery or generate 32.24% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Warner Bros Discovery

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.

Warner Bros Discovery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Nation and Warner Bros

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

The idea behind Live Nation Entertainment and Warner Bros Discovery 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.