Correlation Between Live Nation and TRACTOR SUPPLY

Can any of the company-specific risk be diversified away by investing in both Live Nation and TRACTOR SUPPLY 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 TRACTOR SUPPLY 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 TRACTOR SUPPLY, you can compare the effects of market volatilities on Live Nation and TRACTOR SUPPLY 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 TRACTOR SUPPLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Nation and TRACTOR SUPPLY.

Diversification Opportunities for Live Nation and TRACTOR SUPPLY

0.22

Correlation Coefficient

Live Nation  TRACTOR SUPPLY

Modest diversification

The 3 months correlation between Live and TRACTOR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and TRACTOR SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACTOR SUPPLY 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 TRACTOR SUPPLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRACTOR SUPPLY has no effect on the direction of Live Nation i.e., Live Nation and TRACTOR SUPPLY go up and down completely randomly.

Pair Corralation between Live Nation and TRACTOR SUPPLY

Assuming the 90 days horizon Live Nation Entertainment is expected to generate 0.94 times more return on investment than TRACTOR SUPPLY. However, Live Nation Entertainment is 1.06 times less risky than TRACTOR SUPPLY. It trades about 0.17 of its potential returns per unit of risk. TRACTOR SUPPLY is currently generating about 0.04 per unit of risk. If you would invest  8,682  in Live Nation Entertainment on September 29, 2024 and sell it today you would earn a total of  3,998  from holding Live Nation Entertainment or generate 46.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Live Nation Entertainment  vs.  TRACTOR SUPPLY

Live Nation Entertainment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Live Nation reported solid returns over the last few months and may actually be approaching a breakup point.

TRACTOR SUPPLY

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TRACTOR SUPPLY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TRACTOR SUPPLY is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Live Nation and TRACTOR SUPPLY

The main advantage of trading using opposite Live Nation and TRACTOR SUPPLY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation position performs unexpectedly, TRACTOR SUPPLY 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 TRACTOR SUPPLY will offset losses from the drop in TRACTOR SUPPLY's long position.

The idea behind Live Nation Entertainment and TRACTOR SUPPLY pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.