Correlation Between Alphabet and MGM Resorts
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and MGM Resorts International, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and MGM Resorts.
Diversification Opportunities for Alphabet and MGM Resorts
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alphabet and MGM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and MGM Resorts go up and down completely randomly.
Pair Corralation between Alphabet and MGM Resorts
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the MGM Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.13 times less risky than MGM Resorts. The stock trades about -0.02 of its potential returns per unit of risk. The MGM Resorts International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 75,000 in MGM Resorts International on September 2, 2024 and sell it today you would earn a total of 2,800 from holding MGM Resorts International or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Alphabet Inc Class C vs. MGM Resorts International
Performance |
| Timeline |
| Alphabet Class C |
| MGM Resorts International |
Alphabet and MGM Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and MGM Resorts
The main advantage of trading using opposite Alphabet and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.The idea behind Alphabet Inc Class C and MGM Resorts International 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.| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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