Correlation Between Vail Resorts and Caesars Entertainment

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

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

Diversification Opportunities for Vail Resorts and Caesars Entertainment

-0.52

Correlation Coefficient

Vail Resorts  Caesars Entertainment

Excellent diversification

The 3 months correlation between Vail and Caesars is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts and Caesars Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caesars Entertainment and Vail Resorts 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 Vail Resorts are associated (or correlated) with Caesars Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caesars Entertainment has no effect on the direction of Vail Resorts i.e., Vail Resorts and Caesars Entertainment go up and down completely randomly.

Pair Corralation between Vail Resorts and Caesars Entertainment

Considering the 90-day investment horizon Vail Resorts is expected to generate 0.9 times more return on investment than Caesars Entertainment. However, Vail Resorts is 1.11 times less risky than Caesars Entertainment. It trades about 0.17 of its potential returns per unit of risk. Caesars Entertainment is currently generating about -0.15 per unit of risk. If you would invest  16,884  in Vail Resorts on August 31, 2024 and sell it today you would earn a total of  1,342  from holding Vail Resorts or generate 7.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Vail Resorts  vs.  Caesars Entertainment

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vail Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vail Resorts is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Caesars Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caesars Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Caesars Entertainment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vail Resorts and Caesars Entertainment

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

The idea behind Vail Resorts and Caesars Entertainment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.