Correlation Between Warner Music and Live Nation
Can any of the company-specific risk be diversified away by investing in both Warner 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 Warner 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 Warner Music Group and Live Nation Entertainment, you can compare the effects of market volatilities on Warner 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 Warner Music with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Live Nation.
Diversification Opportunities for Warner Music and Live Nation
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Warner and Live is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Warner 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 Warner 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 Warner 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 Warner Music i.e., Warner Music and Live Nation go up and down completely randomly.
Pair Corralation between Warner Music and Live Nation
Considering the 90-day investment horizon Warner Music Group is expected to under-perform the Live Nation. But the stock apears to be less risky and, when comparing its historical volatility, Warner Music Group is 1.12 times less risky than Live Nation. The stock trades about -0.03 of its potential returns per unit of risk. The Live Nation Entertainment is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 11,568 in Live Nation Entertainment on August 23, 2024 and sell it today you would earn a total of 2,289 from holding Live Nation Entertainment or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Live Nation Entertainment
Performance |
| Timeline |
| Warner Music Group |
| Live Nation Entertainment |
Warner Music and Live Nation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Live Nation
The main advantage of trading using opposite Warner Music and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner 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.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| Live Nation vs. Liberty Media | Live Nation vs. Atlanta Braves Holdings, | Live Nation vs. News Corp B | Live Nation vs. News Corp A |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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