Correlation Between MGM China and Red Rock
Can any of the company-specific risk be diversified away by investing in both MGM China and Red Rock 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 Red Rock 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 Red Rock Resorts, you can compare the effects of market volatilities on MGM China and Red Rock 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 Red Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM China and Red Rock.
Diversification Opportunities for MGM China and Red Rock
Good diversification
The 3 months correlation between MGM and Red is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and Red Rock Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Rock Resorts 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 Red Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Rock Resorts has no effect on the direction of MGM China i.e., MGM China and Red Rock go up and down completely randomly.
Pair Corralation between MGM China and Red Rock
Assuming the 90 days horizon MGM China Holdings is expected to under-perform the Red Rock. In addition to that, MGM China is 1.85 times more volatile than Red Rock Resorts. It trades about -0.21 of its total potential returns per unit of risk. Red Rock Resorts is currently generating about 0.0 per unit of volatility. If you would invest 5,122 in Red Rock Resorts on August 25, 2024 and sell it today you would lose (37.00) from holding Red Rock Resorts or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGM China Holdings vs. Red Rock Resorts
Performance |
| Timeline |
| MGM China Holdings |
| Red Rock Resorts |
MGM China and Red Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGM China and Red Rock
The main advantage of trading using opposite MGM China and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM China position performs unexpectedly, Red Rock 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 Red Rock will offset losses from the drop in Red Rock's long position.| MGM China vs. Banyan Tree Holdings | MGM China vs. Nagacorp | MGM China vs. Wynn Macau | MGM China vs. Table Trac |
| Red Rock vs. Golden Entertainment | Red Rock vs. Century Casinos | Red Rock vs. Studio City International | Red Rock vs. Ballys Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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