Correlation Between Willamette Valley and ELDORADO

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

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

Diversification Opportunities for Willamette Valley and ELDORADO

0.28

Correlation Coefficient

Willamette Valley  ELDORADO

Modest diversification

The 3 months correlation between Willamette and ELDORADO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards 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 Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and ELDORADO go up and down completely randomly.

Pair Corralation between Willamette Valley and ELDORADO

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the ELDORADO. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 24.75 times less risky than ELDORADO. The stock trades about -0.06 of its potential returns per unit of risk. The ELDORADO RESORTS INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,154  in ELDORADO RESORTS INC on October 5, 2024 and sell it today you would earn a total of  81.00  from holding ELDORADO RESORTS INC or generate 0.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.43%
Values	Daily Returns

Willamette Valley Vineyards  vs.  ELDORADO RESORTS INC

Willamette Valley

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Willamette Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Willamette Valley and ELDORADO

The main advantage of trading using opposite Willamette Valley and ELDORADO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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.