Correlation Between Boyd Gaming and CAIRN HOMES

Can any of the company-specific risk be diversified away by investing in both Boyd Gaming and CAIRN HOMES 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 Boyd Gaming and CAIRN HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boyd Gaming and CAIRN HOMES EO, you can compare the effects of market volatilities on Boyd Gaming and CAIRN HOMES 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 Boyd Gaming with a short position of CAIRN HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Gaming and CAIRN HOMES.

Diversification Opportunities for Boyd Gaming and CAIRN HOMES

0.48

Correlation Coefficient

Boyd Gaming  CAIRN HOMES

Very weak diversification

The 3 months correlation between Boyd and CAIRN is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO and Boyd Gaming 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 Boyd Gaming are associated (or correlated) with CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of Boyd Gaming i.e., Boyd Gaming and CAIRN HOMES go up and down completely randomly.

Pair Corralation between Boyd Gaming and CAIRN HOMES

Assuming the 90 days trading horizon Boyd Gaming is expected to generate 0.83 times more return on investment than CAIRN HOMES. However, Boyd Gaming is 1.2 times less risky than CAIRN HOMES. It trades about -0.07 of its potential returns per unit of risk. CAIRN HOMES EO is currently generating about -0.08 per unit of risk. If you would invest  6,782  in Boyd Gaming on December 20, 2024 and sell it today you would lose (582.00) from holding Boyd Gaming or give up 8.58% of portfolio value over 90 days.

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

Boyd Gaming  vs.  CAIRN HOMES EO

Boyd Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

CAIRN HOMES EO

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAIRN HOMES EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Boyd Gaming and CAIRN HOMES

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

The idea behind Boyd Gaming and CAIRN HOMES EO 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.