Can any of the company-specific risk be diversified away by investing in both Lindblad Expeditions 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 Lindblad Expeditions and Caesars Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindblad Expeditions Holdings and Caesars Entertainment, you can compare the effects of market volatilities on Lindblad Expeditions 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 Lindblad Expeditions with a short position of Caesars Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindblad Expeditions and Caesars Entertainment.
Diversification Opportunities for Lindblad Expeditions and Caesars Entertainment
The 3 months correlation between Lindblad and Caesars is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lindblad Expeditions Holdings and Caesars Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caesars Entertainment and Lindblad Expeditions 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 Lindblad Expeditions Holdings 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 Lindblad Expeditions i.e., Lindblad Expeditions and Caesars Entertainment go up and down completely randomly.
Pair Corralation between Lindblad Expeditions and Caesars Entertainment
Given the investment horizon of 90 days Lindblad Expeditions Holdings is expected to generate 0.88 times more return on investment than Caesars Entertainment. However, Lindblad Expeditions Holdings is 1.13 times less risky than Caesars Entertainment. It trades about -0.06 of its potential returns per unit of risk. Caesars Entertainment is currently generating about -0.13 per unit of risk. If you would invest 844.00 in Lindblad Expeditions Holdings on March 6, 2024 and sell it today you would lose (63.00) from holding Lindblad Expeditions Holdings or give up 7.46% of portfolio value over 90 days.
Over the last 90 days Lindblad Expeditions Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Over the last 90 days Caesars Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.