Correlation Between Ford and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Melco Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Melco Resorts Entertainment, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Melco Resorts.
Diversification Opportunities for Ford and Melco Resorts
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Melco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Melco Resorts go up and down completely randomly.
Pair Corralation between Ford and Melco Resorts
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.05 times more return on investment than Melco Resorts. However, Ford is 2.05 times more volatile than Melco Resorts Entertainment. It trades about 0.0 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about -0.17 per unit of risk. If you would invest 992.00 in Ford Motor on November 5, 2024 and sell it today you would lose (3.00) from holding Ford Motor or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Ford Motor vs. Melco Resorts Entertainment
Performance |
| Timeline |
| Ford Motor |
| Melco Resorts Entert |
Ford and Melco Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Melco Resorts
The main advantage of trading using opposite Ford and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Melco Resorts Entertainment 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.| Melco Resorts vs. Monster Beverage | Melco Resorts vs. STMicroelectronics NV | Melco Resorts vs. SVB Financial Group | Melco Resorts vs. Synchrony Financial |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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