Correlation Between MGM Resorts and Wynn Resorts

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

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

Diversification Opportunities for MGM Resorts and Wynn Resorts

0.65

Correlation Coefficient

MGM Resorts  Wynn Resorts

Poor diversification

The 3 months correlation between MGM and Wynn is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Wynn Resorts Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Resorts Limited and MGM Resorts 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 Resorts International are associated (or correlated) with Wynn Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wynn Resorts Limited has no effect on the direction of MGM Resorts i.e., MGM Resorts and Wynn Resorts go up and down completely randomly.

Pair Corralation between MGM Resorts and Wynn Resorts

Assuming the 90 days horizon MGM Resorts International is expected to under-perform the Wynn Resorts. In addition to that, MGM Resorts is 1.03 times more volatile than Wynn Resorts Limited. It trades about -0.01 of its total potential returns per unit of risk. Wynn Resorts Limited is currently generating about 0.03 per unit of volatility. If you would invest  7,671  in Wynn Resorts Limited on September 23, 2024 and sell it today you would earn a total of  803.00  from holding Wynn Resorts Limited or generate 10.47% return on investment over 90 days.

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

MGM Resorts International  vs.  Wynn Resorts Limited

MGM Resorts International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGM Resorts International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MGM Resorts is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Wynn Resorts Limited

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with MGM Resorts and Wynn Resorts

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

The idea behind MGM Resorts International and Wynn Resorts Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.