Correlation Between MGM China and Nagacorp
Can any of the company-specific risk be diversified away by investing in both MGM China and Nagacorp 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 MGM China and Nagacorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGM China Holdings and Nagacorp, you can compare the effects of market volatilities on MGM China and Nagacorp 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 MGM China with a short position of Nagacorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM China and Nagacorp.
Diversification Opportunities for MGM China and Nagacorp
Very weak diversification
The 3 months correlation between MGM and Nagacorp is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and Nagacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nagacorp and MGM China 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 MGM China Holdings are associated (or correlated) with Nagacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nagacorp has no effect on the direction of MGM China i.e., MGM China and Nagacorp go up and down completely randomly.
Pair Corralation between MGM China and Nagacorp
Assuming the 90 days horizon MGM China Holdings is expected to under-perform the Nagacorp. In addition to that, MGM China is 2.28 times more volatile than Nagacorp. It trades about -0.21 of its total potential returns per unit of risk. Nagacorp is currently generating about -0.15 per unit of volatility. If you would invest 41.00 in Nagacorp on August 29, 2024 and sell it today you would lose (3.00) from holding Nagacorp or give up 7.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGM China Holdings vs. Nagacorp
Performance |
| Timeline |
| MGM China Holdings |
| Nagacorp |
MGM China and Nagacorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGM China and Nagacorp
The main advantage of trading using opposite MGM China and Nagacorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM China position performs unexpectedly, Nagacorp 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 Nagacorp will offset losses from the drop in Nagacorp's long position.| MGM China vs. Studio City International | MGM China vs. Monarch Casino Resort | MGM China vs. Playa Hotels Resorts | MGM China vs. Las Vegas Sands |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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