Correlation Between Melco Resorts and Align Technology
Can any of the company-specific risk be diversified away by investing in both Melco Resorts and Align Technology 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 Melco Resorts and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melco Resorts Entertainment and Align Technology, you can compare the effects of market volatilities on Melco Resorts and Align Technology 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 Melco Resorts with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco Resorts and Align Technology.
Diversification Opportunities for Melco Resorts and Align Technology
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Melco and Align is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Melco Resorts 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 Melco Resorts Entertainment are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Melco Resorts i.e., Melco Resorts and Align Technology go up and down completely randomly.
Pair Corralation between Melco Resorts and Align Technology
Assuming the 90 days trading horizon Melco Resorts Entertainment is expected to under-perform the Align Technology. In addition to that, Melco Resorts is 1.21 times more volatile than Align Technology. It trades about -0.03 of its total potential returns per unit of risk. Align Technology is currently generating about -0.01 per unit of volatility. If you would invest 45,856 in Align Technology on October 26, 2024 and sell it today you would lose (13,313) from holding Align Technology or give up 29.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Melco Resorts Entertainment vs. Align Technology
Performance |
| Timeline |
| Melco Resorts Entert |
| Align Technology |
Melco Resorts and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melco Resorts and Align Technology
The main advantage of trading using opposite Melco Resorts and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melco Resorts position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.| Melco Resorts vs. Raytheon Technologies | Melco Resorts vs. GX AI TECH | Melco Resorts vs. Ryanair Holdings plc | Melco Resorts vs. Agilent Technologies |
| Align Technology vs. The Hartford Financial | Align Technology vs. Citizens Financial Group, | Align Technology vs. LPL Financial Holdings | Align Technology vs. Bank of America |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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