Correlation Between Clean Energy and MGM Resorts

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Can any of the company-specific risk be diversified away by investing in both Clean Energy 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 Clean Energy and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Energy Fuels and MGM Resorts International, you can compare the effects of market volatilities on Clean Energy 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 Clean Energy with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and MGM Resorts.

Diversification Opportunities for Clean Energy and MGM Resorts

CleanMGMDiversified AwayCleanMGMDiversified Away100%
-0.19
  Correlation Coefficient

Good diversification

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

Pair Corralation between Clean Energy and MGM Resorts

Assuming the 90 days horizon Clean Energy Fuels is expected to generate 2.28 times more return on investment than MGM Resorts. However, Clean Energy is 2.28 times more volatile than MGM Resorts International. It trades about 0.07 of its potential returns per unit of risk. MGM Resorts International is currently generating about -0.14 per unit of risk. If you would invest  265.00  in Clean Energy Fuels on October 15, 2024 and sell it today you would earn a total of  32.00  from holding Clean Energy Fuels or generate 12.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Clean Energy Fuels  vs.  MGM Resorts International

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-50510
JavaScript chart by amCharts 3.21.15WIQ MGG
       Timeline  
Clean Energy Fuels 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clean Energy reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2.42.52.62.72.82.933.1
MGM Resorts International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan32333435363738

Clean Energy and MGM Resorts Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.7-9.51-6.32-3.13-0.05313.116.389.6512.9216.19 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15WIQ MGG
       Returns  

Pair Trading with Clean Energy and MGM Resorts

The main advantage of trading using opposite Clean Energy and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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 Clean Energy Fuels 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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