Correlation Between Wynn Macau and MGM China

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

By analyzing existing cross correlation between Wynn Macau and MGM China Holdings, you can compare the effects of market volatilities on Wynn Macau and MGM China 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 Wynn Macau with a short position of MGM China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wynn Macau and MGM China.

Diversification Opportunities for Wynn Macau and MGM China

-0.3

Correlation Coefficient

Wynn Macau  MGM China

Very good diversification

The 3 months correlation between Wynn and MGM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Wynn Macau and MGM China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM China Holdings and Wynn Macau 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 Wynn Macau are associated (or correlated) with MGM China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM China Holdings has no effect on the direction of Wynn Macau i.e., Wynn Macau and MGM China go up and down completely randomly.

Pair Corralation between Wynn Macau and MGM China

Assuming the 90 days horizon Wynn Macau is expected to generate 4.2 times less return on investment than MGM China. But when comparing it to its historical volatility, Wynn Macau is 1.13 times less risky than MGM China. It trades about 0.05 of its potential returns per unit of risk. MGM China Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  105.00  in MGM China Holdings on December 27, 2024 and sell it today you would earn a total of  53.00  from holding MGM China Holdings or generate 50.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Wynn Macau  vs.  MGM China Holdings

Wynn Macau

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Macau are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Wynn Macau may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MGM China Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MGM China Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MGM China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wynn Macau and MGM China

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

The idea behind Wynn Macau and MGM China Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.