Correlation Between Patria Investments and Melco Resorts

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

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

Diversification Opportunities for Patria Investments and Melco Resorts

-0.19

Correlation Coefficient

Patria Investments  Melco Resorts

Good diversification

The 3 months correlation between Patria and Melco is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Patria Investments Limited 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 Patria Investments 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 Patria Investments Limited 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 Patria Investments i.e., Patria Investments and Melco Resorts go up and down completely randomly.

Pair Corralation between Patria Investments and Melco Resorts

Assuming the 90 days trading horizon Patria Investments Limited is expected to generate 0.54 times more return on investment than Melco Resorts. However, Patria Investments Limited is 1.84 times less risky than Melco Resorts. It trades about -0.02 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about -0.35 per unit of risk. If you would invest  3,589  in Patria Investments Limited on October 24, 2024 and sell it today you would lose (25.00) from holding Patria Investments Limited or give up 0.7% of portfolio value over 90 days.

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

Patria Investments Limited  vs.  Melco Resorts Entertainment

Patria Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Melco Resorts Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melco Resorts Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Patria Investments and Melco Resorts

The main advantage of trading using opposite Patria Investments and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patria Investments 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 Patria Investments Limited 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.