Correlation Between Wingstop and Caesars Entertainment

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

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

Diversification Opportunities for Wingstop and Caesars Entertainment

0.83

Correlation Coefficient

Wingstop  Caesars Entertainment

Very poor diversification

The 3 months correlation between Wingstop and Caesars is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Caesars Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caesars Entertainment and Wingstop 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 Wingstop 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 Wingstop i.e., Wingstop and Caesars Entertainment go up and down completely randomly.

Pair Corralation between Wingstop and Caesars Entertainment

Given the investment horizon of 90 days Wingstop is expected to generate 1.3 times more return on investment than Caesars Entertainment. However, Wingstop is 1.3 times more volatile than Caesars Entertainment. It trades about -0.24 of its potential returns per unit of risk. Caesars Entertainment is currently generating about -0.4 per unit of risk. If you would invest  33,730  in Wingstop on October 6, 2024 and sell it today you would lose (3,929) from holding Wingstop or give up 11.65% of portfolio value over 90 days.

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

Wingstop  vs.  Caesars Entertainment

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Caesars Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caesars Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Wingstop and Caesars Entertainment

The main advantage of trading using opposite Wingstop and Caesars Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop 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 Wingstop 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.