Correlation Between Telefnica and Live Nation

Can any of the company-specific risk be diversified away by investing in both Telefnica and Live Nation 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 Telefnica and Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Telefnica SA and Live Nation Entertainment,, you can compare the effects of market volatilities on Telefnica and Live Nation 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 Telefnica with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefnica and Live Nation.

Diversification Opportunities for Telefnica and Live Nation

-0.08

Correlation Coefficient

Telefnica  Live Nation

Good diversification

The 3 months correlation between Telefnica and Live is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and Live Nation Entertainment, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertai and Telefnica 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 Telefnica SA are associated (or correlated) with Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertai has no effect on the direction of Telefnica i.e., Telefnica and Live Nation go up and down completely randomly.

Pair Corralation between Telefnica and Live Nation

Assuming the 90 days trading horizon Telefnica SA is expected to under-perform the Live Nation. In addition to that, Telefnica is 1.24 times more volatile than Live Nation Entertainment,. It trades about -0.18 of its total potential returns per unit of risk. Live Nation Entertainment, is currently generating about -0.13 per unit of volatility. If you would invest  16,389  in Live Nation Entertainment, on October 9, 2024 and sell it today you would lose (603.00) from holding Live Nation Entertainment, or give up 3.68% of portfolio value over 90 days.

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

Telefnica SA  vs.  Live Nation Entertainment,

Telefnica SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telefnica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Live Nation Entertai

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. Despite somewhat weak basic indicators, Live Nation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefnica and Live Nation

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

The idea behind Telefnica SA and Live Nation Entertainment, 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.