Correlation Between Kaufman Broad and MGM Resorts

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

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

Diversification Opportunities for Kaufman Broad and MGM Resorts

0.15

Correlation Coefficient

Kaufman Broad  MGM Resorts

Average diversification

The 3 months correlation between Kaufman and MGM is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Kaufman Broad SA and MGM Resorts International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM Resorts International and Kaufman Broad 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 Kaufman Broad SA are associated (or correlated) with MGM Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM Resorts International has no effect on the direction of Kaufman Broad i.e., Kaufman Broad and MGM Resorts go up and down completely randomly.

Pair Corralation between Kaufman Broad and MGM Resorts

Assuming the 90 days horizon Kaufman Broad SA is expected to generate 0.72 times more return on investment than MGM Resorts. However, Kaufman Broad SA is 1.39 times less risky than MGM Resorts. It trades about 0.01 of its potential returns per unit of risk. MGM Resorts International is currently generating about -0.07 per unit of risk. If you would invest  3,190  in Kaufman Broad SA on December 25, 2024 and sell it today you would earn a total of  10.00  from holding Kaufman Broad SA or generate 0.31% return on investment over 90 days.

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

Kaufman Broad SA  vs.  MGM Resorts International

Kaufman Broad SA

Risk-Adjusted Performance

Very Weak

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

MGM Resorts International

Risk-Adjusted Performance

Very Weak

Over the last 90 days MGM Resorts International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Kaufman Broad and MGM Resorts

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

The idea behind Kaufman Broad SA and MGM Resorts International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.