Correlation Between Build A and Caesars Entertainment

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

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

Diversification Opportunities for Build A and Caesars Entertainment

-0.43

Correlation Coefficient

Build A  Caesars Entertainment

Very good diversification

The 3 months correlation between Build and Caesars is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Caesars Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caesars Entertainment and Build A 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 Build A Bear Workshop 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 Build A i.e., Build A and Caesars Entertainment go up and down completely randomly.

Pair Corralation between Build A and Caesars Entertainment

Considering the 90-day investment horizon Build A Bear Workshop is expected to under-perform the Caesars Entertainment. In addition to that, Build A is 1.11 times more volatile than Caesars Entertainment. It trades about -0.06 of its total potential returns per unit of risk. Caesars Entertainment is currently generating about 0.0 per unit of volatility. If you would invest  3,605  in Caesars Entertainment on March 7, 2024 and sell it today you would lose (54.00) from holding Caesars Entertainment or give up 1.5% of portfolio value over 90 days.

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

Build A Bear Workshop  vs.  Caesars Entertainment

Build A Bear

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Build A showed solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Build A and Caesars Entertainment

The main advantage of trading using opposite Build A and Caesars Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A 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 Build A Bear Workshop 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.