Correlation Between Grand Canyon and Boyd Gaming

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

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

Diversification Opportunities for Grand Canyon and Boyd Gaming

0.93

Correlation Coefficient

Grand Canyon  Boyd Gaming

Almost no diversification

The 3 months correlation between Grand and Boyd is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and Boyd Gaming go up and down completely randomly.

Pair Corralation between Grand Canyon and Boyd Gaming

Assuming the 90 days trading horizon Grand Canyon Education is expected to generate 0.95 times more return on investment than Boyd Gaming. However, Grand Canyon Education is 1.05 times less risky than Boyd Gaming. It trades about 0.03 of its potential returns per unit of risk. Boyd Gaming is currently generating about -0.01 per unit of risk. If you would invest  15,600  in Grand Canyon Education on October 5, 2024 and sell it today you would earn a total of  100.00  from holding Grand Canyon Education or generate 0.64% return on investment over 90 days.

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

Grand Canyon Education  vs.  Boyd Gaming

Grand Canyon Education

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Grand Canyon Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Boyd Gaming

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Boyd Gaming reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grand Canyon and Boyd Gaming

The main advantage of trading using opposite Grand Canyon and Boyd Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.