Correlation Between Applied Materials and MGM Resorts
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and MGM Resorts International, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and MGM Resorts.
Diversification Opportunities for Applied Materials and MGM Resorts
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Applied and MGM is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and MGM Resorts go up and down completely randomly.
Pair Corralation between Applied Materials and MGM Resorts
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.14 times more return on investment than MGM Resorts. However, Applied Materials is 1.14 times more volatile than MGM Resorts International. It trades about 0.05 of its potential returns per unit of risk. MGM Resorts International is currently generating about 0.02 per unit of risk. If you would invest 215,193 in Applied Materials on September 2, 2024 and sell it today you would earn a total of 144,207 from holding Applied Materials or generate 67.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Applied Materials vs. MGM Resorts International
Performance |
| Timeline |
| Applied Materials |
| MGM Resorts International |
Applied Materials and MGM Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and MGM Resorts
The main advantage of trading using opposite Applied Materials and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. The Bank of | Applied Materials vs. Grupo Sports World | Applied Materials vs. Monster Beverage Corp | Applied Materials vs. United Airlines Holdings |
| MGM Resorts vs. Applied Materials | MGM Resorts vs. CVS Health | MGM Resorts vs. McEwen Mining | MGM Resorts vs. Cognizant Technology Solutions |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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