Correlation Between Penn National and MGM Resorts

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

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

Diversification Opportunities for Penn National and MGM Resorts

0.52

Correlation Coefficient

Penn National  MGM Resorts

Very weak diversification

The 3 months correlation between Penn and MGM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and MGM Resorts International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM Resorts International and Penn National 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 Penn National Gaming are associated (or correlated) with MGM Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM Resorts International has no effect on the direction of Penn National i.e., Penn National and MGM Resorts go up and down completely randomly.

Pair Corralation between Penn National and MGM Resorts

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the MGM Resorts. In addition to that, Penn National is 1.48 times more volatile than MGM Resorts International. It trades about 0.0 of its total potential returns per unit of risk. MGM Resorts International is currently generating about 0.0 per unit of volatility. If you would invest  4,301  in MGM Resorts International on November 19, 2024 and sell it today you would lose (320.00) from holding MGM Resorts International or give up 7.44% of portfolio value over 90 days.

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

Penn National Gaming  vs.  MGM Resorts International

Penn National Gaming

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National displayed solid returns over the last few months and may actually be approaching a breakup point.

MGM Resorts International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MGM Resorts International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, MGM Resorts may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Penn National and MGM Resorts

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

The idea behind Penn National Gaming and MGM Resorts International 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.