Correlation Between Amazon and Wynn Resorts

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

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

Diversification Opportunities for Amazon and Wynn Resorts

0.26

Correlation Coefficient

Amazon  Wynn Resorts

Modest diversification

The 3 months correlation between Amazon and Wynn is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Wynn Resorts Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Resorts Limited and Amazon 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 Amazon Inc are associated (or correlated) with Wynn Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wynn Resorts Limited has no effect on the direction of Amazon i.e., Amazon and Wynn Resorts go up and down completely randomly.

Pair Corralation between Amazon and Wynn Resorts

Given the investment horizon of 90 days Amazon is expected to generate 1.51 times less return on investment than Wynn Resorts. But when comparing it to its historical volatility, Amazon Inc is 1.57 times less risky than Wynn Resorts. It trades about 0.16 of its potential returns per unit of risk. Wynn Resorts Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,834  in Wynn Resorts Limited on September 3, 2024 and sell it today you would earn a total of  2,063  from holding Wynn Resorts Limited or generate 30.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Amazon Inc  vs.  Wynn Resorts Limited

Amazon Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Wynn Resorts Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Resorts Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wynn Resorts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Wynn Resorts

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

The idea behind Amazon Inc and Wynn Resorts Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..