Correlation Between Melco Resorts and Home Depot
Can any of the company-specific risk be diversified away by investing in both Melco Resorts and Home Depot 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 Home Depot 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 The Home Depot, you can compare the effects of market volatilities on Melco Resorts and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco Resorts and Home Depot.
Diversification Opportunities for Melco Resorts and Home Depot
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Melco and Home is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Melco Resorts i.e., Melco Resorts and Home Depot go up and down completely randomly.
Pair Corralation between Melco Resorts and Home Depot
Assuming the 90 days trading horizon Melco Resorts Entertainment is expected to under-perform the Home Depot. In addition to that, Melco Resorts is 1.62 times more volatile than The Home Depot. It trades about -0.24 of its total potential returns per unit of risk. The Home Depot is currently generating about -0.32 per unit of volatility. If you would invest 9,351 in The Home Depot on October 9, 2024 and sell it today you would lose (874.00) from holding The Home Depot or give up 9.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melco Resorts Entertainment vs. The Home Depot
Performance |
| Timeline |
| Melco Resorts Entert |
| Home Depot |
Melco Resorts and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melco Resorts and Home Depot
The main advantage of trading using opposite Melco Resorts and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melco Resorts position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Melco Resorts vs. Automatic Data Processing | Melco Resorts vs. Pentair plc | Melco Resorts vs. Alaska Air Group, | Melco Resorts vs. Datadog, |
| Home Depot vs. CM Hospitalar SA | Home Depot vs. UnitedHealth Group Incorporated | Home Depot vs. Vulcan Materials | Home Depot vs. Metalrgica Riosulense SA |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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