Correlation Between Walgreens Boots and MGM Resorts

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

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

Diversification Opportunities for Walgreens Boots and MGM Resorts

0.17

Correlation Coefficient

Walgreens Boots  MGM Resorts

Average diversification

The 3 months correlation between Walgreens and MGM is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance 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 Walgreens Boots 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 Walgreens Boots Alliance 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 Walgreens Boots i.e., Walgreens Boots and MGM Resorts go up and down completely randomly.

Pair Corralation between Walgreens Boots and MGM Resorts

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the MGM Resorts. In addition to that, Walgreens Boots is 1.65 times more volatile than MGM Resorts International. It trades about -0.06 of its total potential returns per unit of risk. MGM Resorts International is currently generating about -0.01 per unit of volatility. If you would invest  3,643  in MGM Resorts International on September 23, 2024 and sell it today you would lose (395.00) from holding MGM Resorts International or give up 10.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.54%
Values	Daily Returns

Walgreens Boots Alliance  vs.  MGM Resorts International

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

MGM Resorts International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGM Resorts International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MGM Resorts is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walgreens Boots and MGM Resorts

The main advantage of trading using opposite Walgreens Boots and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots 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 Walgreens Boots Alliance 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.