Correlation Between Melco Resorts and Golden Entertainment

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

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

Diversification Opportunities for Melco Resorts and Golden Entertainment

0.34

Correlation Coefficient

Melco Resorts  Golden Entertainment

Weak diversification

The 3 months correlation between Melco and Golden is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment and Melco 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 Melco Resorts Entertainment are associated (or correlated) with Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Melco Resorts i.e., Melco Resorts and Golden Entertainment go up and down completely randomly.

Pair Corralation between Melco Resorts and Golden Entertainment

Given the investment horizon of 90 days Melco Resorts Entertainment is expected to generate 1.49 times more return on investment than Golden Entertainment. However, Melco Resorts is 1.49 times more volatile than Golden Entertainment. It trades about -0.02 of its potential returns per unit of risk. Golden Entertainment is currently generating about -0.12 per unit of risk. If you would invest  560.00  in Melco Resorts Entertainment on December 28, 2024 and sell it today you would lose (33.00) from holding Melco Resorts Entertainment or give up 5.89% of portfolio value over 90 days.

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

Melco Resorts Entertainment  vs.  Golden Entertainment

Melco Resorts Entert

Risk-Adjusted Performance

Very Weak

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

Golden Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Entertainment 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Melco Resorts and Golden Entertainment

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

The idea behind Melco Resorts Entertainment and Golden 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 Commodity Directory module to find actively traded commodities issued by global exchanges.