Correlation Between Live Nation and Stagwell

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

Diversification Opportunities for Live Nation and Stagwell

0.61

Correlation Coefficient

Live Nation  Stagwell

Poor diversification

The 3 months correlation between Live and Stagwell is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of Live Nation i.e., Live Nation and Stagwell go up and down completely randomly.

Pair Corralation between Live Nation and Stagwell

Considering the 90-day investment horizon Live Nation Entertainment is expected to generate 0.66 times more return on investment than Stagwell. However, Live Nation Entertainment is 1.5 times less risky than Stagwell. It trades about 0.22 of its potential returns per unit of risk. Stagwell is currently generating about -0.03 per unit of risk. If you would invest  10,743  in Live Nation Entertainment on September 24, 2024 and sell it today you would earn a total of  2,540  from holding Live Nation Entertainment or generate 23.64% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Stagwell

Live Nation Entertainment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 17 (%) 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.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Live Nation and Stagwell

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

The idea behind Live Nation Entertainment and Stagwell 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.