Correlation Between Caesars Entertainment and Wesfarmers

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

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

Diversification Opportunities for Caesars Entertainment and Wesfarmers

-0.6

Correlation Coefficient

Caesars Entertainment  Wesfarmers

Excellent diversification

The 3 months correlation between Caesars and Wesfarmers is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Caesars Entertainment and Wesfarmers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers Limited 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 Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers Limited has no effect on the direction of Caesars Entertainment i.e., Caesars Entertainment and Wesfarmers go up and down completely randomly.

Pair Corralation between Caesars Entertainment and Wesfarmers

If you would invest  3,630  in Caesars Entertainment on September 3, 2024 and sell it today you would earn a total of  219.00  from holding Caesars Entertainment or generate 6.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Caesars Entertainment  vs.  Wesfarmers Limited

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.

Wesfarmers Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesfarmers Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Wesfarmers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caesars Entertainment and Wesfarmers

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

The idea behind Caesars Entertainment and Wesfarmers Limited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.