Correlation Between Live Nation and Netflix

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

Diversification Opportunities for Live Nation and Netflix

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Live Nation and Netflix is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Live Nation i.e., Live Nation and Netflix go up and down completely randomly.

Pair Corralation between Live Nation and Netflix

Considering the 90-day investment horizon Live Nation Entertainment is expected to under-perform the Netflix. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 1.44 times less risky than Netflix. The stock trades about -0.15 of its potential returns per unit of risk. The Netflix is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  23,653  in Netflix on September 11, 2022 and sell it today you would earn a total of  8,348  from holding Netflix or generate 35.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Live Nation Entertainment  vs.  Netflix

 Performance (%) 
       Timeline  
Live Nation Entertainment 
Live Nation Performance
0 of 100
Over the last 90 days Live Nation Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2023. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Live Nation Price Channel

Netflix 
Netflix Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Netflix Price Channel

Live Nation and Netflix Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Live Nation and Netflix

The main advantage of trading using opposite Live Nation and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation position performs unexpectedly, Netflix 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 Netflix will offset losses from the drop in Netflix's long position.
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The idea behind Live Nation Entertainment and Netflix 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.
Netflix vs. Alcoa Corp
Netflix vs. Caterpillar
Netflix vs. Walmart
Netflix vs. Intel
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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