Correlation Between Portillos and Golden Entertainment

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

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

Diversification Opportunities for Portillos and Golden Entertainment

0.42

Correlation Coefficient

Portillos  Golden Entertainment

Very weak diversification

The 3 months correlation between Portillos and Golden is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Portillos and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment and Portillos 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 Portillos are associated (or correlated) with Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Portillos i.e., Portillos and Golden Entertainment go up and down completely randomly.

Pair Corralation between Portillos and Golden Entertainment

Given the investment horizon of 90 days Portillos is expected to generate 2.51 times more return on investment than Golden Entertainment. However, Portillos is 2.51 times more volatile than Golden Entertainment. It trades about 0.1 of its potential returns per unit of risk. Golden Entertainment is currently generating about -0.08 per unit of risk. If you would invest  1,155  in Portillos on November 29, 2024 and sell it today you would earn a total of  248.00  from holding Portillos or generate 21.47% return on investment over 90 days.

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

Portillos  vs.  Golden Entertainment

Portillos

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Portillos are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Portillos displayed solid returns over the last few months and may actually be approaching a breakup point.

Golden Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Portillos and Golden Entertainment

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

The idea behind Portillos and Golden 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.