Correlation Between Digital Realty and Live Nation
Can any of the company-specific risk be diversified away by investing in both Digital Realty 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 Digital Realty and Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Realty Trust and Live Nation Entertainment, you can compare the effects of market volatilities on Digital Realty 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 Digital Realty with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Live Nation.
Diversification Opportunities for Digital Realty and Live Nation
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Digital and Live is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust 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 Digital Realty 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 Digital Realty Trust 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 Digital Realty i.e., Digital Realty and Live Nation go up and down completely randomly.
Pair Corralation between Digital Realty and Live Nation
Assuming the 90 days trading horizon Digital Realty is expected to generate 1.05 times less return on investment than Live Nation. But when comparing it to its historical volatility, Digital Realty Trust is 1.05 times less risky than Live Nation. It trades about 0.08 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 7,144 in Live Nation Entertainment on August 28, 2024 and sell it today you would earn a total of 6,843 from holding Live Nation Entertainment or generate 95.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.39% |
| Values | Daily Returns |
Digital Realty Trust vs. Live Nation Entertainment
Performance |
| Timeline |
| Digital Realty Trust |
| Live Nation Entertainment |
Digital Realty and Live Nation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Live Nation
The main advantage of trading using opposite Digital Realty and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty 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.| Digital Realty vs. Baker Steel Resources | Digital Realty vs. Gear4music Plc | Digital Realty vs. Universal Music Group | Digital Realty vs. Zurich Insurance Group |
| Live Nation vs. Samsung Electronics Co | Live Nation vs. Samsung Electronics Co | Live Nation vs. Hyundai Motor | Live Nation vs. Toyota Motor Corp |
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.
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