Correlation Between Warner Bros and Live Nation

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

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

Diversification Opportunities for Warner Bros and Live Nation

0.06

Correlation Coefficient

Warner Bros  Live Nation

Significant diversification

The 3 months correlation between Warner and Live is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment and Warner Bros 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 Warner Bros Discovery 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 Entertainment has no effect on the direction of Warner Bros i.e., Warner Bros and Live Nation go up and down completely randomly.

Pair Corralation between Warner Bros and Live Nation

Considering the 90-day investment horizon Warner Bros Discovery is expected to generate 1.36 times more return on investment than Live Nation. However, Warner Bros is 1.36 times more volatile than Live Nation Entertainment. It trades about 0.0 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.07 per unit of risk. If you would invest  1,063  in Warner Bros Discovery on December 18, 2024 and sell it today you would lose (15.00) from holding Warner Bros Discovery or give up 1.41% of portfolio value over 90 days.

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

Warner Bros Discovery  vs.  Live Nation Entertainment

Warner Bros Discovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Warner Bros Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Warner Bros is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Live Nation Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Live Nation Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Warner Bros and Live Nation

The main advantage of trading using opposite Warner Bros and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Bros 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 Warner Bros Discovery 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.