Correlation Between Boyd Gaming and Vornado Realty

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

By analyzing existing cross correlation between Boyd Gaming and Vornado Realty Trust, you can compare the effects of market volatilities on Boyd Gaming and Vornado Realty 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 Vornado Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Gaming and Vornado Realty.

Diversification Opportunities for Boyd Gaming and Vornado Realty

0.77

Correlation Coefficient

Boyd Gaming  Vornado Realty

Poor diversification

The 3 months correlation between Boyd and Vornado is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust 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 Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of Boyd Gaming i.e., Boyd Gaming and Vornado Realty go up and down completely randomly.

Pair Corralation between Boyd Gaming and Vornado Realty

Assuming the 90 days trading horizon Boyd Gaming is expected to generate 2.38 times less return on investment than Vornado Realty. But when comparing it to its historical volatility, Boyd Gaming is 1.42 times less risky than Vornado Realty. It trades about 0.05 of its potential returns per unit of risk. Vornado Realty Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,496  in Vornado Realty Trust on October 5, 2024 and sell it today you would earn a total of  1,634  from holding Vornado Realty Trust or generate 65.46% return on investment over 90 days.

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

Boyd Gaming  vs.  Vornado Realty Trust

Boyd Gaming

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Boyd Gaming unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vornado Realty Trust

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Vornado Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boyd Gaming and Vornado Realty

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

The idea behind Boyd Gaming and Vornado Realty Trust 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.