Correlation Between Live Nation and SOUTHWEST AIRLINES
Can any of the company-specific risk be diversified away by investing in both Live Nation and SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES, you can compare the effects of market volatilities on Live Nation and SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Nation and SOUTHWEST AIRLINES.
Diversification Opportunities for Live Nation and SOUTHWEST AIRLINES
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Live and SOUTHWEST is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and SOUTHWEST AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHWEST AIRLINES has no effect on the direction of Live Nation i.e., Live Nation and SOUTHWEST AIRLINES go up and down completely randomly.
Pair Corralation between Live Nation and SOUTHWEST AIRLINES
Assuming the 90 days horizon Live Nation Entertainment is expected to generate 1.45 times more return on investment than SOUTHWEST AIRLINES. However, Live Nation is 1.45 times more volatile than SOUTHWEST AIRLINES. It trades about 0.37 of its potential returns per unit of risk. SOUTHWEST AIRLINES is currently generating about 0.2 per unit of risk. If you would invest 10,770 in Live Nation Entertainment on August 29, 2024 and sell it today you would earn a total of 2,795 from holding Live Nation Entertainment or generate 25.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Live Nation Entertainment vs. SOUTHWEST AIRLINES
Performance |
| Timeline |
| Live Nation Entertainment |
| SOUTHWEST AIRLINES |
Live Nation and SOUTHWEST AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Nation and SOUTHWEST AIRLINES
The main advantage of trading using opposite Live Nation and SOUTHWEST AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation position performs unexpectedly, SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES will offset losses from the drop in SOUTHWEST AIRLINES's long position.| Live Nation vs. Superior Plus Corp | Live Nation vs. NMI Holdings | Live Nation vs. SIVERS SEMICONDUCTORS AB | Live Nation vs. Talanx AG |
| SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Superior Plus Corp | SOUTHWEST AIRLINES vs. SIVERS SEMICONDUCTORS AB |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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