Correlation Between MGM Resorts and Wynn Macau

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

Diversification Opportunities for MGM Resorts and Wynn Macau

0.73

Correlation Coefficient

MGM Resorts  Wynn Macau

Poor diversification

The 3 months correlation between MGM and Wynn is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Wynn Macau in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Macau 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 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 Resorts i.e., MGM Resorts and Wynn Macau go up and down completely randomly.

Pair Corralation between MGM Resorts and Wynn Macau

Considering the 90-day investment horizon MGM Resorts International is expected to generate 0.51 times more return on investment than Wynn Macau. However, MGM Resorts International is 1.97 times less risky than Wynn Macau. It trades about -0.13 of its potential returns per unit of risk. Wynn Macau is currently generating about -0.1 per unit of risk. If you would invest  3,798  in MGM Resorts International on September 14, 2024 and sell it today you would lose (118.00) from holding MGM Resorts International or give up 3.11% of portfolio value over 90 days.

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

MGM Resorts International  vs.  Wynn Macau

MGM Resorts International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MGM Resorts International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Wynn Macau

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Macau are ranked lower than 5 (%) 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 Resorts and Wynn Macau

The main advantage of trading using opposite MGM Resorts and Wynn Macau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM Resorts 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 Resorts International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.