Correlation Between ELDORADO and Stepan

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

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

Diversification Opportunities for ELDORADO and Stepan

0.34

Correlation Coefficient

ELDORADO  Stepan

Weak diversification

The 3 months correlation between ELDORADO and Stepan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ELDORADO RESORTS INC and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and ELDORADO 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 ELDORADO RESORTS INC are associated (or correlated) with Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of ELDORADO i.e., ELDORADO and Stepan go up and down completely randomly.

Pair Corralation between ELDORADO and Stepan

Assuming the 90 days trading horizon ELDORADO RESORTS INC is expected to generate 25.51 times more return on investment than Stepan. However, ELDORADO is 25.51 times more volatile than Stepan Company. It trades about 0.04 of its potential returns per unit of risk. Stepan Company is currently generating about -0.05 per unit of risk. If you would invest  10,025  in ELDORADO RESORTS INC on October 13, 2024 and sell it today you would earn a total of  213.00  from holding ELDORADO RESORTS INC or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.37%
Values	Daily Returns

ELDORADO RESORTS INC  vs.  Stepan Company

ELDORADO RESORTS INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELDORADO RESORTS INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ELDORADO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with ELDORADO and Stepan

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

The idea behind ELDORADO RESORTS INC and Stepan Company 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.