Correlation Between MGM China and Wynn Macau

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

Diversification Opportunities for MGM China and Wynn Macau

0.64

Correlation Coefficient

MGM China  Wynn Macau

Poor diversification

The 3 months correlation between MGM and Wynn is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and Wynn Macau in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Macau 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 Wynn Macau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wynn Macau has no effect on the direction of MGM China i.e., MGM China and Wynn Macau go up and down completely randomly.

Pair Corralation between MGM China and Wynn Macau

Assuming the 90 days horizon MGM China Holdings is expected to generate 1.05 times more return on investment than Wynn Macau. However, MGM China is 1.05 times more volatile than Wynn Macau. It trades about 0.03 of its potential returns per unit of risk. Wynn Macau is currently generating about 0.02 per unit of risk. If you would invest  1,411  in MGM China Holdings on September 12, 2024 and sell it today you would earn a total of  95.00  from holding MGM China Holdings or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.85%
Values	Daily Returns

MGM China Holdings  vs.  Wynn Macau

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.

Wynn Macau

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Macau are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Wynn Macau reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGM China and Wynn Macau

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

The idea behind MGM China Holdings and Wynn Macau 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.