Correlation Between First and Las Vegas

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

By analyzing existing cross correlation between First Class Metals and Las Vegas Sands, you can compare the effects of market volatilities on First and Las Vegas 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 First with a short position of Las Vegas. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and Las Vegas.

Diversification Opportunities for First and Las Vegas

0.1

Correlation Coefficient

First  Las Vegas

Average diversification

The 3 months correlation between First and Las is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Las Vegas Sands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Vegas Sands and First 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 First Class Metals are associated (or correlated) with Las Vegas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Vegas Sands has no effect on the direction of First i.e., First and Las Vegas go up and down completely randomly.

Pair Corralation between First and Las Vegas

Assuming the 90 days trading horizon First Class Metals is expected to under-perform the Las Vegas. In addition to that, First is 2.4 times more volatile than Las Vegas Sands. It trades about -0.07 of its total potential returns per unit of risk. Las Vegas Sands is currently generating about 0.0 per unit of volatility. If you would invest  5,296  in Las Vegas Sands on October 11, 2024 and sell it today you would lose (385.00) from holding Las Vegas Sands or give up 7.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

First Class Metals  vs.  Las Vegas Sands

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Class Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Las Vegas Sands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Las Vegas Sands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Las Vegas is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First and Las Vegas

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

The idea behind First Class Metals and Las Vegas Sands 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.