Correlation Between Boyd Gaming and Talen Energy

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

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

Diversification Opportunities for Boyd Gaming and Talen Energy

0.72

Correlation Coefficient

Boyd Gaming  Talen Energy

Poor diversification

The 3 months correlation between Boyd and Talen is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen Energy 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 Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of Boyd Gaming i.e., Boyd Gaming and Talen Energy go up and down completely randomly.

Pair Corralation between Boyd Gaming and Talen Energy

Considering the 90-day investment horizon Boyd Gaming is expected to under-perform the Talen Energy. But the stock apears to be less risky and, when comparing its historical volatility, Boyd Gaming is 3.1 times less risky than Talen Energy. The stock trades about -0.06 of its potential returns per unit of risk. The Talen Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20,012  in Talen Energy on December 27, 2024 and sell it today you would earn a total of  1,761  from holding Talen Energy or generate 8.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Boyd Gaming  vs.  Talen Energy

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 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.

Talen Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talen Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Talen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boyd Gaming and Talen Energy

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

The idea behind Boyd Gaming and Talen Energy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .