Correlation Between TARGET and ELDORADO

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

By analyzing existing cross correlation between TARGET P 7 and ELDORADO RESORTS INC, you can compare the effects of market volatilities on TARGET and ELDORADO 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 TARGET with a short position of ELDORADO. Check out your portfolio center. Please also check ongoing floating volatility patterns of TARGET and ELDORADO.

Diversification Opportunities for TARGET and ELDORADO

0.5

Correlation Coefficient

TARGET  ELDORADO

Very weak diversification

The 3 months correlation between TARGET and ELDORADO is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding TARGET P 7 and ELDORADO RESORTS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELDORADO RESORTS INC and TARGET 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 TARGET P 7 are associated (or correlated) with ELDORADO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELDORADO RESORTS INC has no effect on the direction of TARGET i.e., TARGET and ELDORADO go up and down completely randomly.

Pair Corralation between TARGET and ELDORADO

Assuming the 90 days trading horizon TARGET P 7 is expected to generate 19.4 times more return on investment than ELDORADO. However, TARGET is 19.4 times more volatile than ELDORADO RESORTS INC. It trades about 0.09 of its potential returns per unit of risk. ELDORADO RESORTS INC is currently generating about 0.12 per unit of risk. If you would invest  11,151  in TARGET P 7 on October 10, 2024 and sell it today you would earn a total of  284.00  from holding TARGET P 7 or generate 2.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	38.89%
Values	Daily Returns

TARGET P 7  vs.  ELDORADO RESORTS INC

TARGET P 7

Risk-Adjusted Performance

10 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TARGET sustained solid returns over the last few months and may actually be approaching a breakup point.

ELDORADO RESORTS INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELDORADO RESORTS INC are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TARGET and ELDORADO

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

The idea behind TARGET P 7 and ELDORADO RESORTS INC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.