Correlation Between Equity Residential and Boyd Gaming

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

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

Diversification Opportunities for Equity Residential and Boyd Gaming

0.68

Correlation Coefficient

Equity Residential  Boyd Gaming

Poor diversification

The 3 months correlation between Equity and Boyd is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming and Equity Residential 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 Equity Residential are associated (or correlated) with Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of Equity Residential i.e., Equity Residential and Boyd Gaming go up and down completely randomly.

Pair Corralation between Equity Residential and Boyd Gaming

Assuming the 90 days horizon Equity Residential is expected to generate 0.75 times more return on investment than Boyd Gaming. However, Equity Residential is 1.33 times less risky than Boyd Gaming. It trades about -0.07 of its potential returns per unit of risk. Boyd Gaming is currently generating about -0.07 per unit of risk. If you would invest  6,782  in Equity Residential on December 20, 2024 and sell it today you would lose (382.00) from holding Equity Residential or give up 5.63% of portfolio value over 90 days.

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

Equity Residential  vs.  Boyd Gaming

Equity Residential

Risk-Adjusted Performance

Very Weak

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

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Equity Residential and Boyd Gaming

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

The idea behind Equity Residential and Boyd Gaming 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.