Correlation Between Full House and Melco Resorts

Can any of the company-specific risk be diversified away by investing in both Full House and Melco 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 Full House and Melco Resorts 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 Melco Resorts Entertainment, you can compare the effects of market volatilities on Full House and Melco 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 Full House with a short position of Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Full House and Melco Resorts.

Diversification Opportunities for Full House and Melco Resorts

-0.03

Correlation Coefficient

Full House  Melco Resorts

Good diversification

The 3 months correlation between Full and Melco is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Full House Resorts and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert 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 Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Full House i.e., Full House and Melco Resorts go up and down completely randomly.

Pair Corralation between Full House and Melco Resorts

Considering the 90-day investment horizon Full House Resorts is expected to generate 1.13 times more return on investment than Melco Resorts. However, Full House is 1.13 times more volatile than Melco Resorts Entertainment. It trades about 0.05 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about -0.04 per unit of risk. If you would invest  393.00  in Full House Resorts on December 27, 2024 and sell it today you would earn a total of  25.00  from holding Full House Resorts or generate 6.36% return on investment over 90 days.

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

Full House Resorts  vs.  Melco Resorts Entertainment

Full House Resorts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Full House Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, Full House may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Melco Resorts Entert

Risk-Adjusted Performance

Very Weak

Over the last 90 days Melco Resorts Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Full House and Melco Resorts

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

The idea behind Full House Resorts and Melco Resorts Entertainment 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.