Correlation Between CVS Health and MGM Resorts
Can any of the company-specific risk be diversified away by investing in both CVS Health 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 CVS Health and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and MGM Resorts International, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and MGM Resorts.
Diversification Opportunities for CVS Health and MGM Resorts
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and MGM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health 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 CVS Health 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 CVS Health 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 CVS Health i.e., CVS Health and MGM Resorts go up and down completely randomly.
Pair Corralation between CVS Health and MGM Resorts
Assuming the 90 days trading horizon CVS Health is expected to under-perform the MGM Resorts. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 1.06 times less risky than MGM Resorts. The stock trades about -0.03 of its potential returns per unit of risk. The MGM Resorts International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 72,552 in MGM Resorts International on September 2, 2024 and sell it today you would earn a total of 5,248 from holding MGM Resorts International or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
CVS Health vs. MGM Resorts International
Performance |
| Timeline |
| CVS Health |
| MGM Resorts International |
CVS Health and MGM Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and MGM Resorts
The main advantage of trading using opposite CVS Health and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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.| CVS Health vs. DXC Technology | CVS Health vs. United Airlines Holdings | CVS Health vs. Genworth Financial | CVS Health vs. Deutsche Bank Aktiengesellschaft |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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