Correlation Between X FAB and Live Nation

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

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

Diversification Opportunities for X FAB and Live Nation

-0.52

Correlation Coefficient

X FAB  Live Nation

Excellent diversification

The 3 months correlation between XFB and Live is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries 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 X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Live Nation go up and down completely randomly.

Pair Corralation between X FAB and Live Nation

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.7 times more return on investment than Live Nation. However, X FAB is 1.7 times more volatile than Live Nation Entertainment. It trades about 0.22 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about 0.18 per unit of risk. If you would invest  437.00  in X FAB Silicon Foundries on September 16, 2024 and sell it today you would earn a total of  60.00  from holding X FAB Silicon Foundries or generate 13.73% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Live Nation Entertainment

X FAB Silicon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, X FAB 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

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Live Nation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and Live Nation

The main advantage of trading using opposite X FAB and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.