Correlation Between MGM Resorts and Caesars Entertainment

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

Diversification Opportunities for MGM Resorts and Caesars Entertainment

0.83

Correlation Coefficient

MGM Resorts  Caesars Entertainment

Very poor diversification

The 3 months correlation between MGM and Caesars is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Caesars Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caesars Entertainment 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 Caesars Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caesars Entertainment has no effect on the direction of MGM Resorts i.e., MGM Resorts and Caesars Entertainment go up and down completely randomly.

Pair Corralation between MGM Resorts and Caesars Entertainment

Considering the 90-day investment horizon MGM Resorts International is expected to generate 1.13 times more return on investment than Caesars Entertainment. However, MGM Resorts is 1.13 times more volatile than Caesars Entertainment. It trades about -0.04 of its potential returns per unit of risk. Caesars Entertainment is currently generating about -0.11 per unit of risk. If you would invest  3,477  in MGM Resorts International on December 27, 2024 and sell it today you would lose (316.00) from holding MGM Resorts International or give up 9.09% of portfolio value over 90 days.

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

MGM Resorts International  vs.  Caesars Entertainment

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 unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Caesars Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caesars Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with MGM Resorts and Caesars Entertainment

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

The idea behind MGM Resorts International and Caesars Entertainment 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.