Correlation Between Vail Resorts and MGM China

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

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

Diversification Opportunities for Vail Resorts and MGM China

-0.41

Correlation Coefficient

Vail Resorts  MGM China

Very good diversification

The 3 months correlation between Vail and MGM is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts and MGM China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM China Holdings and Vail 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 Vail Resorts are associated (or correlated) with MGM China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM China Holdings has no effect on the direction of Vail Resorts i.e., Vail Resorts and MGM China go up and down completely randomly.

Pair Corralation between Vail Resorts and MGM China

Considering the 90-day investment horizon Vail Resorts is expected to under-perform the MGM China. But the stock apears to be less risky and, when comparing its historical volatility, Vail Resorts is 1.08 times less risky than MGM China. The stock trades about -0.16 of its potential returns per unit of risk. The MGM China Holdings is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,500  in MGM China Holdings on October 22, 2024 and sell it today you would earn a total of  175.00  from holding MGM China Holdings or generate 11.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Vail Resorts  vs.  MGM China Holdings

Vail Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vail Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Vail Resorts may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MGM China Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MGM China Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, MGM China may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vail Resorts and MGM China

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

The idea behind Vail Resorts and MGM China Holdings 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.