Correlation Between MGM Resorts and Las Vegas

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

Diversification Opportunities for MGM Resorts and Las Vegas

0.12

Correlation Coefficient

MGM Resorts  Las Vegas

Average diversification

The 3 months correlation between MGM and Las is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Las Vegas Sands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Vegas Sands 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 Las Vegas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Vegas Sands has no effect on the direction of MGM Resorts i.e., MGM Resorts and Las Vegas go up and down completely randomly.

Pair Corralation between MGM Resorts and Las Vegas

Assuming the 90 days trading horizon MGM Resorts International is expected to generate 1.19 times more return on investment than Las Vegas. However, MGM Resorts is 1.19 times more volatile than Las Vegas Sands. It trades about -0.04 of its potential returns per unit of risk. Las Vegas Sands is currently generating about -0.16 per unit of risk. If you would invest  70,800  in MGM Resorts International on December 28, 2024 and sell it today you would lose (6,400) from holding MGM Resorts International or give up 9.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

MGM Resorts International  vs.  Las Vegas Sands

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 latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Las Vegas Sands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Las Vegas Sands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MGM Resorts and Las Vegas

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

The idea behind MGM Resorts International and Las Vegas Sands 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.