Correlation Between Live Nation and WRIT Media

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

Diversification Opportunities for Live Nation and WRIT Media

-0.66

Correlation Coefficient

Live Nation  WRIT Media

Excellent diversification

The 3 months correlation between Live and WRIT is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and WRIT Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WRIT Media Group 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 WRIT Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WRIT Media Group has no effect on the direction of Live Nation i.e., Live Nation and WRIT Media go up and down completely randomly.

Pair Corralation between Live Nation and WRIT Media

Considering the 90-day investment horizon Live Nation Entertainment is expected to under-perform the WRIT Media. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 28.55 times less risky than WRIT Media. The stock trades about -0.14 of its potential returns per unit of risk. The WRIT Media Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.18  in WRIT Media Group on September 22, 2024 and sell it today you would earn a total of  0.12  from holding WRIT Media Group or generate 66.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Live Nation Entertainment  vs.  WRIT Media Group

Live Nation Entertainment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 19 (%) 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.

WRIT Media Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WRIT Media Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, WRIT Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Nation and WRIT Media

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

The idea behind Live Nation Entertainment and WRIT Media Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.