Correlation Between Live Nation and Dolby Laboratories

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

Diversification Opportunities for Live Nation and Dolby Laboratories

0.4

Correlation Coefficient

Live Nation  Dolby Laboratories

Very weak diversification

The 3 months correlation between Live and Dolby is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Dolby Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolby Laboratories 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 Dolby Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolby Laboratories has no effect on the direction of Live Nation i.e., Live Nation and Dolby Laboratories go up and down completely randomly.

Pair Corralation between Live Nation and Dolby Laboratories

Considering the 90-day investment horizon Live Nation Entertainment is expected to under-perform the Dolby Laboratories. In addition to that, Live Nation is 2.09 times more volatile than Dolby Laboratories. It trades about -0.45 of its total potential returns per unit of risk. Dolby Laboratories is currently generating about -0.28 per unit of volatility. If you would invest  8,322  in Dolby Laboratories on January 24, 2024 and sell it today you would lose (441.00) from holding Dolby Laboratories or give up 5.3% of portfolio value over 90 days.

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

Live Nation Entertainment  vs.  Dolby Laboratories

Live Nation Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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 fairly stable basic indicators, Live Nation is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Dolby Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolby Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Live Nation and Dolby Laboratories

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

The idea behind Live Nation Entertainment and Dolby Laboratories 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.