Correlation Between MGM China and Nagacorp

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

Diversification Opportunities for MGM China and Nagacorp

0.58

Correlation Coefficient

MGM China  Nagacorp

Very weak diversification

The 3 months correlation between MGM and Nagacorp is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and Nagacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nagacorp 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 Nagacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nagacorp has no effect on the direction of MGM China i.e., MGM China and Nagacorp go up and down completely randomly.

Pair Corralation between MGM China and Nagacorp

Assuming the 90 days horizon MGM China Holdings is expected to under-perform the Nagacorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, MGM China Holdings is 1.4 times less risky than Nagacorp. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Nagacorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Nagacorp on September 12, 2024 and sell it today you would earn a total of  2.00  from holding Nagacorp or generate 5.26% return on investment over 90 days.

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

MGM China Holdings  vs.  Nagacorp

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. In spite of fairly strong basic indicators, MGM China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nagacorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nagacorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nagacorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGM China and Nagacorp

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

The idea behind MGM China Holdings and Nagacorp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.