Correlation Between JAPAN AIRLINES and Wynn Resorts

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

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

Diversification Opportunities for JAPAN AIRLINES and Wynn Resorts

0.16

Correlation Coefficient

JAPAN AIRLINES  Wynn Resorts

Average diversification

The 3 months correlation between JAPAN and Wynn is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES i.e., JAPAN AIRLINES and Wynn Resorts go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Wynn Resorts

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.49 times more return on investment than Wynn Resorts. However, JAPAN AIRLINES is 2.04 times less risky than Wynn Resorts. It trades about 0.02 of its potential returns per unit of risk. Wynn Resorts Limited is currently generating about -0.11 per unit of risk. If you would invest  1,510  in JAPAN AIRLINES on October 5, 2024 and sell it today you would earn a total of  10.00  from holding JAPAN AIRLINES or generate 0.66% return on investment over 90 days.

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

JAPAN AIRLINES  vs.  Wynn Resorts Limited

JAPAN AIRLINES

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Wynn Resorts Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wynn Resorts Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with JAPAN AIRLINES and Wynn Resorts

The main advantage of trading using opposite JAPAN AIRLINES and Wynn Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES 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 JAPAN AIRLINES 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.