Correlation Between Boyd Gaming and Americas Car

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

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

Diversification Opportunities for Boyd Gaming and Americas Car

0.09

Correlation Coefficient

Boyd Gaming  Americas Car

Significant diversification

The 3 months correlation between Boyd and Americas is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and Americas Car Mart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Car Mart 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 Americas Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Car Mart has no effect on the direction of Boyd Gaming i.e., Boyd Gaming and Americas Car go up and down completely randomly.

Pair Corralation between Boyd Gaming and Americas Car

Considering the 90-day investment horizon Boyd Gaming is expected to generate 0.56 times more return on investment than Americas Car. However, Boyd Gaming is 1.79 times less risky than Americas Car. It trades about -0.03 of its potential returns per unit of risk. Americas Car Mart is currently generating about -0.24 per unit of risk. If you would invest  7,607  in Boyd Gaming on November 28, 2024 and sell it today you would lose (66.00) from holding Boyd Gaming or give up 0.87% of portfolio value over 90 days.

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

Boyd Gaming  vs.  Americas Car Mart

Boyd Gaming

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Boyd Gaming is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Americas Car Mart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Americas Car Mart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Americas Car is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Boyd Gaming and Americas Car

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

The idea behind Boyd Gaming and Americas Car Mart 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.