Correlation Between Applied Materials and Live Nation
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Live Nation Entertainment, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Live Nation.
Diversification Opportunities for Applied Materials and Live Nation
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Applied and Live is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Live Nation go up and down completely randomly.
Pair Corralation between Applied Materials and Live Nation
Assuming the 90 days trading horizon Applied Materials is expected to generate 2.25 times more return on investment than Live Nation. However, Applied Materials is 2.25 times more volatile than Live Nation Entertainment. It trades about 0.02 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.16 per unit of risk. If you would invest 17,187 in Applied Materials on October 12, 2024 and sell it today you would earn a total of 114.00 from holding Applied Materials or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Applied Materials vs. Live Nation Entertainment
Performance |
| Timeline |
| Applied Materials |
| Live Nation Entertainment |
Applied Materials and Live Nation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Live Nation
The main advantage of trading using opposite Applied Materials and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. BE Semiconductor Industries | Applied Materials vs. mobilezone holding AG | Applied Materials vs. Spirent Communications plc | Applied Materials vs. SBM Offshore NV |
| Live Nation vs. Software Circle plc | Live Nation vs. Scandic Hotels Group | Live Nation vs. Sabien Technology Group | Live Nation vs. Melia Hotels |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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