Correlation Between Las Vegas and Melco Resorts

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

Diversification Opportunities for Las Vegas and Melco Resorts

0.46

Correlation Coefficient

Las Vegas  Melco Resorts

Very weak diversification

The 3 months correlation between Las and Melco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Las Vegas Sands 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 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 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 Las Vegas i.e., Las Vegas and Melco Resorts go up and down completely randomly.

Pair Corralation between Las Vegas and Melco Resorts

Considering the 90-day investment horizon Las Vegas Sands is expected to under-perform the Melco Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Las Vegas Sands is 1.24 times less risky than Melco Resorts. The stock trades about -0.16 of its potential returns per unit of risk. The Melco Resorts Entertainment is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  588.00  in Melco Resorts Entertainment on December 27, 2024 and sell it today you would lose (50.00) from holding Melco Resorts Entertainment or give up 8.5% of portfolio value over 90 days.

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

Las Vegas Sands  vs.  Melco Resorts Entertainment

Las Vegas Sands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Las Vegas Sands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Las Vegas and Melco Resorts

The main advantage of trading using opposite Las Vegas and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Las Vegas 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 Las Vegas Sands 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.