Correlation Between Live Nation and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Live Nation and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on Live Nation and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Nation and Applied Materials.
Diversification Opportunities for Live Nation and Applied Materials
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Live and Applied is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Live Nation i.e., Live Nation and Applied Materials go up and down completely randomly.
Pair Corralation between Live Nation and Applied Materials
Assuming the 90 days trading horizon Live Nation is expected to generate 5.3 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Live Nation Entertainment is 2.1 times less risky than Applied Materials. It trades about 0.15 of its potential returns per unit of risk. Applied Materials is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 16,817 in Applied Materials on October 25, 2024 and sell it today you would earn a total of 2,971 from holding Applied Materials or generate 17.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Live Nation Entertainment vs. Applied Materials
Performance |
| Timeline |
| Live Nation Entertainment |
| Applied Materials |
Live Nation and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Nation and Applied Materials
The main advantage of trading using opposite Live Nation and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Live Nation vs. Toyota Motor Corp | Live Nation vs. SoftBank Group Corp | Live Nation vs. OTP Bank Nyrt | Live Nation vs. ONEOK Inc |
| Applied Materials vs. Toyota Motor Corp | Applied Materials vs. SoftBank Group Corp | Applied Materials vs. OTP Bank Nyrt | Applied Materials vs. ONEOK Inc |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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