Correlation Between MGM China and Sands China

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

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

Diversification Opportunities for MGM China and Sands China

-0.24

Correlation Coefficient

MGM China  Sands China

Very good diversification

The 3 months correlation between MGM and Sands is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and Sands China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands China and MGM China 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 MGM China Holdings are associated (or correlated) with Sands China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands China has no effect on the direction of MGM China i.e., MGM China and Sands China go up and down completely randomly.

Pair Corralation between MGM China and Sands China

Assuming the 90 days horizon MGM China Holdings is expected to under-perform the Sands China. In addition to that, MGM China is 1.27 times more volatile than Sands China Ltd. It trades about -0.13 of its total potential returns per unit of risk. Sands China Ltd is currently generating about 0.01 per unit of volatility. If you would invest  2,331  in Sands China Ltd on October 20, 2024 and sell it today you would lose (4.00) from holding Sands China Ltd or give up 0.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

MGM China Holdings  vs.  Sands China Ltd

MGM China Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGM China Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sands China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sands China Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sands China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MGM China and Sands China

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

The idea behind MGM China Holdings and Sands China Ltd 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.