Correlation Between Netflix and Live Nation

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Can any of the company-specific risk be diversified away by investing in both Netflix and Live Nation 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 Netflix and Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Live Nation Entertainment, you can compare the effects of market volatilities on Netflix and Live Nation 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 Netflix with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Live Nation.

Diversification Opportunities for Netflix and Live Nation

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Netflix and Live Nation is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment and Netflix 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 Netflix are associated (or correlated) with Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of Netflix i.e., Netflix and Live Nation go up and down completely randomly.

Pair Corralation between Netflix and Live Nation

Given the investment horizon of 90 days Netflix is expected to generate 0.98 times more return on investment than Live Nation. However, Netflix is 1.02 times less risky than Live Nation. It trades about -0.04 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.18 per unit of risk. If you would invest  29,694  in Netflix on August 28, 2022 and sell it today you would lose (1,140)  from holding Netflix or give up 3.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Netflix  vs.  Live Nation Entertainment

 Performance (%) 
       Timeline  
Netflix 
Netflix Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 8 (%) 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 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 December 2022. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Live Nation Price Channel

Netflix and Live Nation Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Netflix and Live Nation

The main advantage of trading using opposite Netflix and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Live Nation 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 Live Nation will offset losses from the drop in Live Nation's long position.
Netflix vs. Electronic Arts
Netflix vs. Comcast Corp A
Netflix vs. Gamestop Corp
Netflix vs. Dish Network Corp
The idea behind Netflix and Live Nation Entertainment 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.
Live Nation vs. Electronic Arts
Live Nation vs. Comcast Corp A
Live Nation vs. Gamestop Corp
Live Nation vs. Dish Network Corp
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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