Correlation Between Live Nation and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Live Nation and Coca Cola 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 Coca Cola 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 Coca Cola HBC, you can compare the effects of market volatilities on Live Nation and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Nation and Coca Cola.
Diversification Opportunities for Live Nation and Coca Cola
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Live and Coca is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Coca Cola HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola HBC has no effect on the direction of Live Nation i.e., Live Nation and Coca Cola go up and down completely randomly.
Pair Corralation between Live Nation and Coca Cola
Assuming the 90 days trading horizon Live Nation Entertainment is expected to generate 2.83 times more return on investment than Coca Cola. However, Live Nation is 2.83 times more volatile than Coca Cola HBC. It trades about 0.35 of its potential returns per unit of risk. Coca Cola HBC is currently generating about 0.11 per unit of risk. If you would invest 11,754 in Live Nation Entertainment on September 2, 2024 and sell it today you would earn a total of 2,098 from holding Live Nation Entertainment or generate 17.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Live Nation Entertainment vs. Coca Cola HBC
Performance |
| Timeline |
| Live Nation Entertainment |
| Coca Cola HBC |
Live Nation and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Nation and Coca Cola
The main advantage of trading using opposite Live Nation and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Live Nation vs. Uniper SE | Live Nation vs. Mulberry Group PLC | Live Nation vs. London Security Plc | Live Nation vs. Triad Group PLC |
| Coca Cola vs. Home Depot | Coca Cola vs. Weiss Korea Opportunity | Coca Cola vs. River and Mercantile | Coca Cola vs. Chrysalis Investments |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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