Correlation Between Universal Music and Live Nation
Can any of the company-specific risk be diversified away by investing in both Universal Music 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 Universal Music and Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Music Group and Live Nation Entertainment, you can compare the effects of market volatilities on Universal Music 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 Universal Music with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and Live Nation.
Diversification Opportunities for Universal Music and Live Nation
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Universal and Live is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group 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 Universal Music 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 Universal Music Group 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 Universal Music i.e., Universal Music and Live Nation go up and down completely randomly.
Pair Corralation between Universal Music and Live Nation
Assuming the 90 days trading horizon Universal Music Group is expected to under-perform the Live Nation. But the stock apears to be less risky and, when comparing its historical volatility, Universal Music Group is 1.71 times less risky than Live Nation. The stock trades about -0.2 of its potential returns per unit of risk. The Live Nation Entertainment is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 11,882 in Live Nation Entertainment on August 28, 2024 and sell it today you would earn a total of 2,105 from holding Live Nation Entertainment or generate 17.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. Live Nation Entertainment
Performance |
| Timeline |
| Universal Music Group |
| Live Nation Entertainment |
Universal Music and Live Nation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and Live Nation
The main advantage of trading using opposite Universal Music and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music 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.| Universal Music vs. Samsung Electronics Co | Universal Music vs. Samsung Electronics Co | Universal Music vs. Hyundai Motor | Universal Music vs. Toyota Motor Corp |
| 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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