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

0.99

Correlation Coefficient

Live Nation  Liberty Media

No risk reduction

The 3 months correlation between Live and Liberty is 0.99. 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 is expected to generate 1.68 times less return on investment than Liberty Media. But when comparing it to its historical volatility, Live Nation Entertainment is 1.41 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 0.48 of returns per unit of risk over similar time horizon. If you would invest  3,854  in Liberty Media on September 1, 2024 and sell it today you would earn a total of  3,315  from holding Liberty Media or generate 86.01% 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.  Liberty Media

Live Nation Entertainment

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 31 (%) 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

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.