Correlation Between Wynn Resorts and Despegar Corp

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

Diversification Opportunities for Wynn Resorts and Despegar Corp

-0.48

Correlation Coefficient

Wynn Resorts  Despegar Corp

Very good diversification

The 3 months correlation between Wynn and Despegar is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wynn Resorts Limited and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar 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 Despegar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Despegar Corp has no effect on the direction of Wynn Resorts i.e., Wynn Resorts and Despegar Corp go up and down completely randomly.

Pair Corralation between Wynn Resorts and Despegar Corp

Given the investment horizon of 90 days Wynn Resorts Limited is expected to under-perform the Despegar Corp. But the stock apears to be less risky and, when comparing its historical volatility, Wynn Resorts Limited is 2.66 times less risky than Despegar Corp. The stock trades about -0.04 of its potential returns per unit of risk. The Despegar Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  867.00  in Despegar Corp on March 5, 2024 and sell it today you would earn a total of  643.00  from holding Despegar Corp or generate 74.16% return on investment over 90 days.

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

Wynn Resorts Limited  vs.  Despegar Corp

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 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.

Despegar Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wynn Resorts and Despegar Corp

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

The idea behind Wynn Resorts Limited and Despegar 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.