Correlation Between Vail Resorts and Melco Resorts

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

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

Diversification Opportunities for Vail Resorts and Melco Resorts

-0.54

Correlation Coefficient

Vail Resorts  Melco Resorts

Excellent diversification

The 3 months correlation between Vail and Melco is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert 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 Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Vail Resorts i.e., Vail Resorts and Melco Resorts go up and down completely randomly.

Pair Corralation between Vail Resorts and Melco Resorts

Considering the 90-day investment horizon Vail Resorts is expected to under-perform the Melco Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Vail Resorts is 1.96 times less risky than Melco Resorts. The stock trades about 0.0 of its potential returns per unit of risk. The Melco Resorts Entertainment is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  505.00  in Melco Resorts Entertainment on September 3, 2024 and sell it today you would earn a total of  137.00  from holding Melco Resorts Entertainment or generate 27.13% return on investment over 90 days.

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

Vail Resorts  vs.  Melco Resorts Entertainment

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Melco Resorts Entert

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melco Resorts Entertainment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Melco Resorts displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vail Resorts and Melco Resorts

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

The idea behind Vail Resorts and Melco Resorts 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.