Correlation Between Melco Resorts and Cable One

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

Diversification Opportunities for Melco Resorts and Cable One

MelcoCableDiversified AwayMelcoCableDiversified Away100%
0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Melco and Cable is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Melco Resorts i.e., Melco Resorts and Cable One go up and down completely randomly.

Pair Corralation between Melco Resorts and Cable One

Assuming the 90 days trading horizon Melco Resorts Entertainment is expected to generate 0.8 times more return on investment than Cable One. However, Melco Resorts Entertainment is 1.25 times less risky than Cable One. It trades about -0.11 of its potential returns per unit of risk. Cable One is currently generating about -0.21 per unit of risk. If you would invest  1,828  in Melco Resorts Entertainment on November 14, 2024 and sell it today you would lose (287.00) from holding Melco Resorts Entertainment or give up 15.7% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy91.38%
ValuesDaily Returns

Melco Resorts Entertainment  vs.  Cable One

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -100102030405060
JavaScript chart by amCharts 3.21.15M1LC34 C1AB34
       Timeline  
Melco Resorts Entert 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb161718192021
Cable One 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Cable One 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 basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15NovDecJanFebDecJanFeb891011121314

Melco Resorts and Cable One Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.98-2.98-1.98-0.98-0.01440.831.72.563.424.28 0.0400.0450.0500.0550.0600.0650.070
JavaScript chart by amCharts 3.21.15M1LC34 C1AB34
       Returns  

Pair Trading with Melco Resorts and Cable One

The main advantage of trading using opposite Melco Resorts and Cable One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melco Resorts position performs unexpectedly, Cable One 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 Cable One will offset losses from the drop in Cable One's long position.
The idea behind Melco Resorts Entertainment and Cable One 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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