Correlation Between Caesars Entertainment and Good Vibrations

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

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

Diversification Opportunities for Caesars Entertainment and Good Vibrations

-0.57

Correlation Coefficient

Caesars Entertainment  Good Vibrations

Excellent diversification

The 3 months correlation between Caesars and Good is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Caesars Entertainment and Good Vibrations Shoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Vibrations Shoes and Caesars Entertainment 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 Caesars Entertainment are associated (or correlated) with Good Vibrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Vibrations Shoes has no effect on the direction of Caesars Entertainment i.e., Caesars Entertainment and Good Vibrations go up and down completely randomly.

Pair Corralation between Caesars Entertainment and Good Vibrations

Considering the 90-day investment horizon Caesars Entertainment is expected to generate 4.27 times less return on investment than Good Vibrations. But when comparing it to its historical volatility, Caesars Entertainment is 3.4 times less risky than Good Vibrations. It trades about 0.05 of its potential returns per unit of risk. Good Vibrations Shoes is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.21  in Good Vibrations Shoes on September 4, 2024 and sell it today you would earn a total of  0.02  from holding Good Vibrations Shoes or generate 9.52% return on investment over 90 days.

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

Caesars Entertainment  vs.  Good Vibrations Shoes

Caesars Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caesars Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Caesars Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Good Vibrations Shoes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Good Vibrations Shoes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Good Vibrations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caesars Entertainment and Good Vibrations

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

The idea behind Caesars Entertainment and Good Vibrations Shoes 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.