Correlation Between Melco Resorts and Agilent Technologies

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

By analyzing existing cross correlation between Melco Resorts Entertainment and Agilent Technologies, you can compare the effects of market volatilities on Melco Resorts and Agilent Technologies 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 Melco Resorts with a short position of Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco Resorts and Agilent Technologies.

Diversification Opportunities for Melco Resorts and Agilent Technologies

0.39

Correlation Coefficient

Melco Resorts  Agilent Technologies

Weak diversification

The 3 months correlation between Melco and Agilent is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Melco Resorts 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 Melco Resorts Entertainment are associated (or correlated) with Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of Melco Resorts i.e., Melco Resorts and Agilent Technologies go up and down completely randomly.

Pair Corralation between Melco Resorts and Agilent Technologies

Assuming the 90 days trading horizon Melco Resorts Entertainment is expected to under-perform the Agilent Technologies. In addition to that, Melco Resorts is 1.94 times more volatile than Agilent Technologies. It trades about -0.12 of its total potential returns per unit of risk. Agilent Technologies is currently generating about 0.02 per unit of volatility. If you would invest  41,360  in Agilent Technologies on October 4, 2024 and sell it today you would earn a total of  396.00  from holding Agilent Technologies or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Melco Resorts Entertainment  vs.  Agilent Technologies

Melco Resorts Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melco Resorts Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Agilent Technologies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Agilent Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Melco Resorts and Agilent Technologies

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

The idea behind Melco Resorts Entertainment and Agilent Technologies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.