Correlation Between Las Vegas and Vail Resorts

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

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

Diversification Opportunities for Las Vegas and Vail Resorts

0.44

Correlation Coefficient

Las Vegas  Vail Resorts

Very weak diversification

The 3 months correlation between Las and Vail is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Las Vegas Sands and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts and Las Vegas 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 Las Vegas Sands are associated (or correlated) with Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Las Vegas i.e., Las Vegas and Vail Resorts go up and down completely randomly.

Pair Corralation between Las Vegas and Vail Resorts

Assuming the 90 days horizon Las Vegas is expected to generate 1.03 times less return on investment than Vail Resorts. But when comparing it to its historical volatility, Las Vegas Sands is 1.13 times less risky than Vail Resorts. It trades about 0.12 of its potential returns per unit of risk. Vail Resorts is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  16,500  in Vail Resorts on September 22, 2024 and sell it today you would earn a total of  800.00  from holding Vail Resorts or generate 4.85% return on investment over 90 days.

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

Las Vegas Sands  vs.  Vail Resorts

Las Vegas Sands

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Las Vegas Sands are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Las Vegas reported solid returns over the last few months and may actually be approaching a breakup point.

Vail Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vail Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vail Resorts may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Las Vegas and Vail Resorts

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

The idea behind Las Vegas Sands and Vail Resorts 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.