Correlation Between Monarch Casino and MGM Resorts

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

By analyzing existing cross correlation between Monarch Casino Resort and MGM Resorts International, you can compare the effects of market volatilities on Monarch Casino and MGM Resorts 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 Monarch Casino with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monarch Casino and MGM Resorts.

Diversification Opportunities for Monarch Casino and MGM Resorts

0.51

Correlation Coefficient

Monarch Casino  MGM Resorts

Very weak diversification

The 3 months correlation between Monarch and MGM is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Monarch Casino Resort and MGM Resorts International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM Resorts International and Monarch Casino 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 Monarch Casino Resort are associated (or correlated) with MGM Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM Resorts International has no effect on the direction of Monarch Casino i.e., Monarch Casino and MGM Resorts go up and down completely randomly.

Pair Corralation between Monarch Casino and MGM Resorts

Given the investment horizon of 90 days Monarch Casino Resort is expected to generate 0.54 times more return on investment than MGM Resorts. However, Monarch Casino Resort is 1.87 times less risky than MGM Resorts. It trades about 0.04 of its potential returns per unit of risk. MGM Resorts International is currently generating about -0.03 per unit of risk. If you would invest  7,810  in Monarch Casino Resort on December 28, 2024 and sell it today you would earn a total of  238.00  from holding Monarch Casino Resort or generate 3.05% return on investment over 90 days.

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

Monarch Casino Resort  vs.  MGM Resorts International

Monarch Casino Resort

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monarch Casino Resort are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Monarch Casino is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

MGM Resorts International

Risk-Adjusted Performance

Very Weak

Over the last 90 days MGM Resorts International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MGM Resorts is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Monarch Casino and MGM Resorts

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

The idea behind Monarch Casino Resort and MGM Resorts International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.