Correlation Between Golden Entertainment and Wynn Resorts

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

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

Diversification Opportunities for Golden Entertainment and Wynn Resorts

-0.1

Correlation Coefficient

Golden Entertainment  Wynn Resorts

Good diversification

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

Pair Corralation between Golden Entertainment and Wynn Resorts

Given the investment horizon of 90 days Golden Entertainment is expected to under-perform the Wynn Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Golden Entertainment is 1.25 times less risky than Wynn Resorts. The stock trades about -0.09 of its potential returns per unit of risk. The Wynn Resorts Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,559  in Wynn Resorts Limited on December 28, 2024 and sell it today you would earn a total of  56.00  from holding Wynn Resorts Limited or generate 0.65% return on investment over 90 days.

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

Golden Entertainment  vs.  Wynn Resorts Limited

Golden Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Wynn Resorts Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Resorts Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wynn Resorts is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Golden Entertainment and Wynn Resorts

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

The idea behind Golden Entertainment and Wynn Resorts 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.