Correlation Between Las Vegas and MGM Resorts

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

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

Diversification Opportunities for Las Vegas and MGM Resorts

0.29

Correlation Coefficient

Las Vegas  MGM Resorts

Modest diversification

The 3 months correlation between Las and MGM is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Las Vegas Sands 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 Las Vegas 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 Las Vegas Sands 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 Las Vegas i.e., Las Vegas and MGM Resorts go up and down completely randomly.

Pair Corralation between Las Vegas and MGM Resorts

Assuming the 90 days horizon Las Vegas Sands is expected to generate 1.35 times more return on investment than MGM Resorts. However, Las Vegas is 1.35 times more volatile than MGM Resorts International. It trades about 0.11 of its potential returns per unit of risk. MGM Resorts International is currently generating about -0.35 per unit of risk. If you would invest  4,795  in Las Vegas Sands on September 23, 2024 and sell it today you would earn a total of  191.00  from holding Las Vegas Sands or generate 3.98% return on investment over 90 days.

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

Las Vegas Sands  vs.  MGM Resorts International

Las Vegas Sands

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Las Vegas Sands are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Las Vegas reported solid returns over the last few months and may actually be approaching a breakup point.

MGM Resorts International

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, MGM Resorts is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Las Vegas and MGM Resorts

The main advantage of trading using opposite Las Vegas and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Las Vegas 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 Las Vegas Sands 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.