Correlation Between MGM China and SkyCity Entertainment

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

Diversification Opportunities for MGM China and SkyCity Entertainment

-0.41

Correlation Coefficient

MGM China  SkyCity Entertainment

Very good diversification

The 3 months correlation between MGM and SkyCity is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and SkyCity Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyCity Entertainment 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 SkyCity Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyCity Entertainment has no effect on the direction of MGM China i.e., MGM China and SkyCity Entertainment go up and down completely randomly.

Pair Corralation between MGM China and SkyCity Entertainment

Assuming the 90 days horizon MGM China Holdings is expected to generate 0.82 times more return on investment than SkyCity Entertainment. However, MGM China Holdings is 1.23 times less risky than SkyCity Entertainment. It trades about 0.08 of its potential returns per unit of risk. SkyCity Entertainment Group is currently generating about -0.13 per unit of risk. If you would invest  1,500  in MGM China Holdings on December 28, 2024 and sell it today you would earn a total of  115.00  from holding MGM China Holdings or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

MGM China Holdings  vs.  SkyCity Entertainment Group

MGM China Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MGM China Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, MGM China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SkyCity Entertainment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with MGM China and SkyCity Entertainment

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

The idea behind MGM China Holdings and SkyCity Entertainment Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.