Correlation Between Sands China and Studio City

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

By analyzing existing cross correlation between Sands China Ltd and Studio City International, you can compare the effects of market volatilities on Sands China and Studio City 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 Sands China with a short position of Studio City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sands China and Studio City.

Diversification Opportunities for Sands China and Studio City

0.45

Correlation Coefficient

Sands China  Studio City

Very weak diversification

The 3 months correlation between Sands and Studio is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sands China Ltd and Studio City International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Studio City International and Sands China 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 Sands China Ltd are associated (or correlated) with Studio City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Studio City International has no effect on the direction of Sands China i.e., Sands China and Studio City go up and down completely randomly.

Pair Corralation between Sands China and Studio City

Assuming the 90 days horizon Sands China is expected to generate 5.47 times less return on investment than Studio City. But when comparing it to its historical volatility, Sands China Ltd is 1.81 times less risky than Studio City. It trades about 0.01 of its potential returns per unit of risk. Studio City International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Studio City International on September 14, 2024 and sell it today you would earn a total of  24.00  from holding Studio City International or generate 3.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Sands China Ltd  vs.  Studio City International

Sands China

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sands China Ltd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Sands China showed solid returns over the last few months and may actually be approaching a breakup point.

Studio City International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Studio City International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Studio City exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sands China and Studio City

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

The idea behind Sands China Ltd and Studio City 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.