Correlation Between Vail Resorts and Las Vegas

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

By analyzing existing cross correlation between Vail Resorts and Las Vegas Sands, you can compare the effects of market volatilities on Vail Resorts and Las Vegas 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 Las Vegas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vail Resorts and Las Vegas.

Diversification Opportunities for Vail Resorts and Las Vegas

0.58

Correlation Coefficient

Vail Resorts  Las Vegas

Very weak diversification

The 3 months correlation between Vail and Las is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts and Las Vegas Sands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Vegas Sands 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 Las Vegas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Vegas Sands has no effect on the direction of Vail Resorts i.e., Vail Resorts and Las Vegas go up and down completely randomly.

Pair Corralation between Vail Resorts and Las Vegas

Assuming the 90 days horizon Vail Resorts is expected to generate 1.23 times less return on investment than Las Vegas. But when comparing it to its historical volatility, Vail Resorts is 1.05 times less risky than Las Vegas. It trades about 0.09 of its potential returns per unit of risk. Las Vegas Sands is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,848  in Las Vegas Sands on October 2, 2024 and sell it today you would earn a total of  1,030  from holding Las Vegas Sands or generate 26.77% return on investment over 90 days.

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

Vail Resorts  vs.  Las Vegas Sands

Vail Resorts

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vail Resorts are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vail Resorts reported solid returns over the last few months and may actually be approaching a breakup point.

Las Vegas Sands

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Las Vegas Sands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Las Vegas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vail Resorts and Las Vegas

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

The idea behind Vail Resorts and Las Vegas Sands 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.