Correlation Between Dow Jones and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Melco Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Melco Resorts Entertainment, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Melco Resorts.
Diversification Opportunities for Dow Jones and Melco Resorts
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Melco is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Melco Resorts go up and down completely randomly.
Pair Corralation between Dow Jones and Melco Resorts
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.22 times more return on investment than Melco Resorts. However, Dow Jones Industrial is 4.65 times less risky than Melco Resorts. It trades about 0.11 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about -0.05 per unit of risk. If you would invest 3,367,438 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 1,062,213 from holding Dow Jones Industrial or generate 31.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Melco Resorts Entertainment
Performance |
| Timeline |
Dow Jones and Melco Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Melco Resorts Entertainment
Pair trading matchups for Melco Resorts
Pair Trading with Dow Jones and Melco Resorts
The main advantage of trading using opposite Dow Jones and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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