Correlation Between Wynn Resorts and Peabody Energy

Can any of the company-specific risk be diversified away by investing in both Wynn Resorts and Peabody Energy 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 Peabody Energy 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 Peabody Energy Corp, you can compare the effects of market volatilities on Wynn Resorts and Peabody Energy 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 Peabody Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wynn Resorts and Peabody Energy.

Diversification Opportunities for Wynn Resorts and Peabody Energy

-0.46

Correlation Coefficient

Wynn Resorts  Peabody Energy

Very good diversification

The 3 months correlation between Wynn and Peabody is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Wynn Resorts Limited and Peabody Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy Corp 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 Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy Corp has no effect on the direction of Wynn Resorts i.e., Wynn Resorts and Peabody Energy go up and down completely randomly.

Pair Corralation between Wynn Resorts and Peabody Energy

Given the investment horizon of 90 days Wynn Resorts Limited is expected to under-perform the Peabody Energy. In addition to that, Wynn Resorts is 1.12 times more volatile than Peabody Energy Corp. It trades about -0.09 of its total potential returns per unit of risk. Peabody Energy Corp is currently generating about -0.01 per unit of volatility. If you would invest  2,359  in Peabody Energy Corp on January 26, 2024 and sell it today you would lose (13.00) from holding Peabody Energy Corp or give up 0.55% of portfolio value over 90 days.

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

Wynn Resorts Limited  vs.  Peabody Energy Corp

Wynn Resorts Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Resorts Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wynn Resorts is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Peabody Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peabody Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Wynn Resorts and Peabody Energy

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

The idea behind Wynn Resorts Limited and Peabody Energy Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.