Correlation Between Melco Resorts and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Melco Resorts and Cognizant 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 Cognizant 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 Cognizant Technology Solutions, you can compare the effects of market volatilities on Melco Resorts and Cognizant 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 Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco Resorts and Cognizant Technology.
Diversification Opportunities for Melco Resorts and Cognizant Technology
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Melco and Cognizant is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant 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 Cognizant Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognizant Technology has no effect on the direction of Melco Resorts i.e., Melco Resorts and Cognizant Technology go up and down completely randomly.
Pair Corralation between Melco Resorts and Cognizant Technology
Assuming the 90 days trading horizon Melco Resorts Entertainment is expected to generate 6.14 times more return on investment than Cognizant Technology. However, Melco Resorts is 6.14 times more volatile than Cognizant Technology Solutions. It trades about 0.03 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.04 per unit of risk. If you would invest 1,612 in Melco Resorts Entertainment on October 26, 2024 and sell it today you would earn a total of 72.00 from holding Melco Resorts Entertainment or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Melco Resorts Entertainment vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Melco Resorts Entert |
| Cognizant Technology |
Melco Resorts and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melco Resorts and Cognizant Technology
The main advantage of trading using opposite Melco Resorts and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melco Resorts position performs unexpectedly, Cognizant 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 Cognizant Technology will offset losses from the drop in Cognizant Technology's long position.| Melco Resorts vs. Burlington Stores, | Melco Resorts vs. GP Investments | Melco Resorts vs. United Rentals | Melco Resorts vs. Electronic Arts |
| Cognizant Technology vs. LPL Financial Holdings | Cognizant Technology vs. Ameriprise Financial | Cognizant Technology vs. Nordon Indstrias Metalrgicas | Cognizant Technology vs. MAHLE Metal Leve |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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