Correlation Between Full House and DraftKings

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

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

Diversification Opportunities for Full House and DraftKings

-0.39

Correlation Coefficient

Full House  DraftKings

Very good diversification

The 3 months correlation between Full and DraftKings is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Full House Resorts and DraftKings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DraftKings and Full House 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 Full House Resorts are associated (or correlated) with DraftKings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DraftKings has no effect on the direction of Full House i.e., Full House and DraftKings go up and down completely randomly.

Pair Corralation between Full House and DraftKings

Considering the 90-day investment horizon Full House Resorts is expected to under-perform the DraftKings. But the stock apears to be less risky and, when comparing its historical volatility, Full House Resorts is 1.56 times less risky than DraftKings. The stock trades about -0.59 of its potential returns per unit of risk. The DraftKings is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  4,306  in DraftKings on September 27, 2024 and sell it today you would lose (449.00) from holding DraftKings or give up 10.43% of portfolio value over 90 days.

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

Full House Resorts  vs.  DraftKings

Full House Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Full House Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

DraftKings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DraftKings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DraftKings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Full House and DraftKings

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

The idea behind Full House Resorts and DraftKings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.