Correlation Between Live Nation and Liberty Media

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

Diversification Opportunities for Live Nation and Liberty Media

0.88

Correlation Coefficient

Live Nation  Liberty Media

Very poor diversification

The 3 months correlation between Live and Liberty is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Live Nation i.e., Live Nation and Liberty Media go up and down completely randomly.

Pair Corralation between Live Nation and Liberty Media

Considering the 90-day investment horizon Live Nation Entertainment is expected to generate 0.96 times more return on investment than Liberty Media. However, Live Nation Entertainment is 1.04 times less risky than Liberty Media. It trades about 0.4 of its potential returns per unit of risk. Liberty Media is currently generating about 0.19 per unit of risk. If you would invest  11,720  in Live Nation Entertainment on August 31, 2024 and sell it today you would earn a total of  2,253  from holding Live Nation Entertainment or generate 19.22% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Liberty Media

Live Nation Entertainment

Risk-Adjusted Performance

32 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Live Nation showed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Liberty Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Nation and Liberty Media

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

The idea behind Live Nation Entertainment and Liberty Media 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.