Correlation Between Bank of America and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both Bank of America and Melco 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 Bank of America and Melco Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Melco Resorts Entertainment, you can compare the effects of market volatilities on Bank of America and Melco 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 Bank of America with a short position of Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Melco Resorts.
Diversification Opportunities for Bank of America and Melco Resorts
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Melco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert and Bank of America 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 Bank of America are associated (or correlated) with Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Bank of America i.e., Bank of America and Melco Resorts go up and down completely randomly.
Pair Corralation between Bank of America and Melco Resorts
Considering the 90-day investment horizon Bank of America is expected to generate 13.67 times less return on investment than Melco Resorts. But when comparing it to its historical volatility, Bank of America is 3.95 times less risky than Melco Resorts. It trades about 0.05 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 554.00 in Melco Resorts Entertainment on November 18, 2024 and sell it today you would earn a total of 73.00 from holding Melco Resorts Entertainment or generate 13.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Melco Resorts Entertainment
Performance |
| Timeline |
| Bank of America |
| Melco Resorts Entert |
Bank of America and Melco Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Melco Resorts
The main advantage of trading using opposite Bank of America and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Melco 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 Melco Resorts will offset losses from the drop in Melco Resorts' long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| Melco Resorts vs. Wynn Resorts Limited | Melco Resorts vs. MGM Resorts International | Melco Resorts vs. Caesars Entertainment | Melco Resorts vs. Penn National Gaming |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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