Correlation Between Monarch Casino and Boyd Gaming

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

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

Diversification Opportunities for Monarch Casino and Boyd Gaming

0.94

Correlation Coefficient

Monarch Casino  Boyd Gaming

Almost no diversification

The 3 months correlation between Monarch and Boyd is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Monarch Casino Resort and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming and Monarch Casino 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 Monarch Casino Resort 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 Monarch Casino i.e., Monarch Casino and Boyd Gaming go up and down completely randomly.

Pair Corralation between Monarch Casino and Boyd Gaming

Given the investment horizon of 90 days Monarch Casino is expected to generate 1.28 times less return on investment than Boyd Gaming. But when comparing it to its historical volatility, Monarch Casino Resort is 1.12 times less risky than Boyd Gaming. It trades about 0.18 of its potential returns per unit of risk. Boyd Gaming is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,145  in Boyd Gaming on September 16, 2024 and sell it today you would earn a total of  1,350  from holding Boyd Gaming or generate 21.97% return on investment over 90 days.

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

Monarch Casino Resort  vs.  Boyd Gaming

Monarch Casino Resort

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monarch Casino Resort are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Monarch Casino demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Boyd Gaming

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Boyd Gaming exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monarch Casino and Boyd Gaming

The main advantage of trading using opposite Monarch Casino and Boyd Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monarch Casino 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 Monarch Casino Resort 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.