Correlation Between Wingstop and Eldorado Resorts

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

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

Diversification Opportunities for Wingstop and Eldorado Resorts

0.0

Correlation Coefficient

Wingstop  Eldorado Resorts

Pay attention - limited upside

The 3 months correlation between Wingstop and Eldorado is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Eldorado Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eldorado Resorts and Wingstop 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 Wingstop are associated (or correlated) with Eldorado Resorts. 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 has no effect on the direction of Wingstop i.e., Wingstop and Eldorado Resorts go up and down completely randomly.

Pair Corralation between Wingstop and Eldorado Resorts

If you would invest  35,043  in Wingstop on February 5, 2024 and sell it today you would earn a total of  3,812  from holding Wingstop or generate 10.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Wingstop  vs.  Eldorado Resorts

Wingstop

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wingstop are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Wingstop reported solid returns over the last few months and may actually be approaching a breakup point.

Eldorado Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wingstop and Eldorado Resorts

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

The idea behind Wingstop and Eldorado Resorts 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.