Correlation Between Boyd Gaming and Advanced Drainage

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

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

Diversification Opportunities for Boyd Gaming and Advanced Drainage

-0.77

Correlation Coefficient

Boyd Gaming  Advanced Drainage

Pay attention - limited upside

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

Pair Corralation between Boyd Gaming and Advanced Drainage

Considering the 90-day investment horizon Boyd Gaming is expected to generate 0.61 times more return on investment than Advanced Drainage. However, Boyd Gaming is 1.63 times less risky than Advanced Drainage. It trades about 0.21 of its potential returns per unit of risk. Advanced Drainage Systems is currently generating about -0.09 per unit of risk. If you would invest  6,145  in Boyd Gaming on September 16, 2024 and sell it today you would earn a total of  1,350  from holding Boyd Gaming or generate 21.97% return on investment over 90 days.

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

Boyd Gaming  vs.  Advanced Drainage Systems

Boyd Gaming

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Boyd Gaming exhibited solid returns over the last few months and may actually be approaching a breakup point.

Advanced Drainage Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Drainage Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Boyd Gaming and Advanced Drainage

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

The idea behind Boyd Gaming and Advanced Drainage Systems 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.