Correlation Between Full House and MGM China

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

Diversification Opportunities for Full House and MGM China

0.33

Correlation Coefficient

Full House  MGM China

Weak diversification

The 3 months correlation between Full and MGM is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Full House Resorts and MGM China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM China Holdings 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 MGM China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM China Holdings has no effect on the direction of Full House i.e., Full House and MGM China go up and down completely randomly.

Pair Corralation between Full House and MGM China

Considering the 90-day investment horizon Full House Resorts is expected to under-perform the MGM China. But the stock apears to be less risky and, when comparing its historical volatility, Full House Resorts is 1.57 times less risky than MGM China. The stock trades about -0.1 of its potential returns per unit of risk. The MGM China Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,611  in MGM China Holdings on September 14, 2024 and sell it today you would lose (105.00) from holding MGM China Holdings or give up 6.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Full House Resorts  vs.  MGM China Holdings

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.

MGM China Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGM China Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MGM China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Full House and MGM China

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

The idea behind Full House Resorts and MGM China Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.