Correlation Between Wynn Macau and Banyan Tree

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

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

Diversification Opportunities for Wynn Macau and Banyan Tree

0.02

Correlation Coefficient

Wynn Macau  Banyan Tree

Significant diversification

The 3 months correlation between Wynn and Banyan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Wynn Macau and Banyan Tree Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banyan Tree Holdings and Wynn Macau 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 Wynn Macau are associated (or correlated) with Banyan Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banyan Tree Holdings has no effect on the direction of Wynn Macau i.e., Wynn Macau and Banyan Tree go up and down completely randomly.

Pair Corralation between Wynn Macau and Banyan Tree

Assuming the 90 days horizon Wynn Macau is expected to generate 44.31 times less return on investment than Banyan Tree. But when comparing it to its historical volatility, Wynn Macau is 15.49 times less risky than Banyan Tree. It trades about 0.02 of its potential returns per unit of risk. Banyan Tree Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Banyan Tree Holdings on September 12, 2024 and sell it today you would lose (0.02) from holding Banyan Tree Holdings or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.63%
Values	Daily Returns

Wynn Macau  vs.  Banyan Tree Holdings

Wynn Macau

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Macau are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Wynn Macau reported solid returns over the last few months and may actually be approaching a breakup point.

Banyan Tree Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banyan Tree Holdings 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wynn Macau and Banyan Tree

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

The idea behind Wynn Macau and Banyan Tree Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.