Correlation Between Live Nation and Johnson Johnson

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

Diversification Opportunities for Live Nation and Johnson Johnson

-0.23

Correlation Coefficient

Live Nation  Johnson Johnson

Very good diversification

The 3 months correlation between Live and Johnson is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Live Nation i.e., Live Nation and Johnson Johnson go up and down completely randomly.

Pair Corralation between Live Nation and Johnson Johnson

Considering the 90-day investment horizon Live Nation Entertainment is expected to generate 1.71 times more return on investment than Johnson Johnson. However, Live Nation is 1.71 times more volatile than Johnson Johnson. It trades about 0.03 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.02 per unit of risk. If you would invest  8,208  in Live Nation Entertainment on January 19, 2024 and sell it today you would earn a total of  756.00  from holding Live Nation Entertainment or generate 9.21% return on investment over 90 days.

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

Live Nation Entertainment  vs.  Johnson Johnson

Live Nation Entertainment

Risk-Adjusted Performance

0 of 100

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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Pair Trading with Live Nation and Johnson Johnson

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

The idea behind Live Nation Entertainment and Johnson Johnson 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.