Correlation Between Wynn Resorts and Frontdoor

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

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

Diversification Opportunities for Wynn Resorts and Frontdoor

-0.68

Correlation Coefficient

Wynn Resorts  Frontdoor

Excellent diversification

The 3 months correlation between Wynn and Frontdoor is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wynn Resorts Limited and Frontdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontdoor and Wynn 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 Wynn Resorts Limited are associated (or correlated) with Frontdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontdoor has no effect on the direction of Wynn Resorts i.e., Wynn Resorts and Frontdoor go up and down completely randomly.

Pair Corralation between Wynn Resorts and Frontdoor

Given the investment horizon of 90 days Wynn Resorts Limited is expected to under-perform the Frontdoor. In addition to that, Wynn Resorts is 1.42 times more volatile than Frontdoor. It trades about -0.38 of its total potential returns per unit of risk. Frontdoor is currently generating about -0.16 per unit of volatility. If you would invest  5,752  in Frontdoor on October 10, 2024 and sell it today you would lose (247.00) from holding Frontdoor or give up 4.29% of portfolio value over 90 days.

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

Wynn Resorts Limited  vs.  Frontdoor

Wynn Resorts Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wynn Resorts Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Frontdoor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontdoor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Frontdoor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wynn Resorts and Frontdoor

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

The idea behind Wynn Resorts Limited and Frontdoor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.