Correlation Between Carriage Services and Caesars Entertainment

Can any of the company-specific risk be diversified away by investing in both Carriage Services and Caesars Entertainment 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 Carriage Services and Caesars Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carriage Services and Caesars Entertainment, you can compare the effects of market volatilities on Carriage Services and Caesars Entertainment 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 Carriage Services with a short position of Caesars Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carriage Services and Caesars Entertainment.

Diversification Opportunities for Carriage Services and Caesars Entertainment

-0.85

Correlation Coefficient

Carriage Services  Caesars Entertainment

Pay attention - limited upside

The 3 months correlation between Carriage and Caesars is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Carriage Services and Caesars Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caesars Entertainment and Carriage Services 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 Carriage Services are associated (or correlated) with Caesars Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caesars Entertainment has no effect on the direction of Carriage Services i.e., Carriage Services and Caesars Entertainment go up and down completely randomly.

Pair Corralation between Carriage Services and Caesars Entertainment

Considering the 90-day investment horizon Carriage Services is expected to generate 0.68 times more return on investment than Caesars Entertainment. However, Carriage Services is 1.47 times less risky than Caesars Entertainment. It trades about 0.13 of its potential returns per unit of risk. Caesars Entertainment is currently generating about 0.0 per unit of risk. If you would invest  2,636  in Carriage Services on October 9, 2024 and sell it today you would earn a total of  1,294  from holding Carriage Services or generate 49.09% return on investment over 90 days.

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

Carriage Services  vs.  Caesars Entertainment

Carriage Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carriage Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Carriage Services showed solid returns over the last few months and may actually be approaching a breakup point.

Caesars Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caesars Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Carriage Services and Caesars Entertainment

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

The idea behind Carriage Services and Caesars Entertainment 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.